Asos Warns of $32 Million No-Deal Brexit Hit After Profit Soars
Asos Profits Soar as Shoppers Buy More Online During Pandemic
(Bloomberg) -- Asos Plc warned it could face a 25 million-pound ($32 million) hit from tariffs in the event of a no-deal Brexit, even as it gets a boost from more consumers shopping from home during the pandemic.
Asos disclosed the potential Brexit costs as it reported strong gains in sales and profit following a surge in online clothes shopping during the pandemic. Investors were worried by the retailer’s cautious outlook, however, and its shares fell as much as 12% in London.
The tariff cost could possibly be higher as it doesn’t include the expense of managing additional paperwork if Britain fails to secure a timely trade agreement, the London-based online fashion company said. Asos hasn’t decided whether extra costs from a potential Brexit no-deal would be passed on to customers.
More than a third of U.K. retailers didn’t know or “really understand” what their businesses need to do to prepare for the end of the Brexit transition period, according to an informal poll on Wednesday. The survey was conducted among attendees of a Brexit preparation webinar hosted by the U.K. Department for Business, Energy and Industrial Strategy. It was not disclosed how many people were on the webinar or participated in the poll.
Young Shoppers
Asos reported that profit more than quadrupled in the latest year, to 142.1 million pounds, as revenue jumped 19%. Gains were fueled by increased orders, lower capital expenditure and fewer returns, reducing costs.
The retailer expects underlying profit to increase in the current year but remains cautious because of the weaker economic prospects for its core customer base of young shoppers. In a nod to the changing outlook for that demographic group, it will launch a new brand, AsYou, in two weeks with products priced from 8 pounds to 28 pounds.
Lower pricing will step up the company’s already fierce competition with rival Boohoo Group Plc, known for selling dresses for as little as 5 pounds. Britain’s fast-fashion industry has been in focus during the pandemic following reports of labor abuse at factories in Leicester supplying Boohoo.
Asos has been increasing production from suppliers in Leicester, England, in the past three years. The new brand “will stay true to our ethos and design-led approach,” Chief Executive Officer Nick Beighton said.
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