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ASOS profits plunge 87% after discounting, website issues

ASOS blamed slashed prices and less website traffic for its profit slump. Photo: Tim Goode/PA Archive/PA Images

Online retailer ASOS has seen its half-year profits tumble after difficulties caused by expansion costs and heavy discounting.

The company’s latest interim results, published on Wednesday, show pre-tax profits crashed 87% to just £4m in the six months to 28 February.

Sales were stable during the period, rising 14% to £1.3bn. ASOS cited “temporary transition costs” such as new warehouse capacity, as well as a high level of discounting and promotion, that contributed to the profit drop.

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Marketing changes also led to a drop in its search engine rankings, resulting in less visitors to its website, the retailer said.

Chief executive Nick Beighton claimed ASOS has identified “a number of things” it can do better and implemented changes that will yield more success in the last half of the year. However, guidance for the year will not change, he said.

“We are confident of an improved performance in the second half and are not changing our guidance for the year,” Beighton said.

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“We are nearing the end of a major capex capital expenditure programme.

“While this has inevitably involved significant disruption and transition costs, the global capability it now provides us gives us increased confidence in our ability to continue to capture market share whilst restoring profitability and accelerating free cash flow generation.”

The global fashion industry has expanded to now be worth more than £220bn, according to Beighton.

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“We now have the tech platform, the infrastructure, a constant conversation with our growing customer base who love our own great product and the constantly evolving edit of brands we present to them,” he said.

“We believe that ultimately there will only be a handful of companies with truly global scale in this market. We are determined that ASOS will be one of them.”

ASOS warned in December that its profits were likely to fall, saying slashing prices had not been successful in significantly increasing sales.