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ASOS hopes for logistics payback as it counts cost of EU warehouse transition issues

ASOS

ASOS said it had shrugged off warehouse transition issues this year and was preparing to capitalise on logistics investments as it reported its full year financial results.

The fast fashion retailer reported revenue of £2.7 billion for the year to 31 August, up 13% year-on-year. Gross profit was £1.3 billion, up 8%, but pre-tax profit slumped 68% to £33.1 million.

ASOS said it had invested heavily in logistics in the last three years to double its warehousing capacity, as well as introducing dynamic buffers and AI-driven purchase prediction technology, improving throughput and reducing labour costs.

The company says it is now in a position to make use of the benefits from the investments, including through efficiency improvements and enhancements to customer propositions. ASOS claims it can now cost efficiently manage a range of 85,000 customer-facing stock-keeping units (SKUs), with 5000 new SKUs added each week. It also claims to be offer next-day delivery to over 80% of its sales base.

While UK sales rose 15%, in Europe, ASOS said its 12% growth in retail sales had been lower than expected due to challenges in moving to the new Euro Hub. It said order growth had lagged visits growth, with conversion rates falling 10 basis points (bps) or 0.1%.

ASOS said the operational issues had resulted in a “sub-optimal experience” for customers and that work would have to be done to re-engage customers in the first half of this financial year.

Nick Beighton, CEO, commented: “This financial year was a pivotal period for ASOS, where we have invested significantly and enhanced our global platform capability to drive our future growth. Regrettably this was more disruptive than we originally anticipated. However, having identified the root causes of our operational issues, we have made substantial progress over the last few months in resolving them. Whilst there remains lots of work to be done to get the business back on track, we are now in a more positive position to start the new financial year.

“Our focus now shifts to ensuring that we enhance our capability to drive an improved customer experience and leverage the benefits from the investments we have made. With over 60% of our revenue coming from international customers and a strong global logistics platform with capacity to grow, we are well positioned to take advantage of the global growth opportunity ahead of us.”

ASOS took what it called a “modular” approach to building out the Euro Hub, adding incremental improvements. The project has the ambitious goal of offering total capacity of 20 million units.

This article was updated (17/10/19) to include pre-tax profit figures.