Asos has warned that full-year profits will fall sharply as cash-strapped customers return more items to the online clothing retailer.
The company said that while sales rose in the three months to the end of May, profit had been hit by “inflationary pressures on consumers”.
Asos’s chief operating officer Mat Dunn said it was “too early” to tell how long this behaviour would continue.
But the firm expects adjusted pre-tax profit to fall to between £20m to £60m.
It is far below Asos’s prediction in January when it said annual profit was set to reach between £110m and £140m, and a sharp decline from the previous financial year when it hit £193.6m.
Asos said the higher rate of returns was adding to warehouse and delivery costs. It said profit would be impacted if it had to cut prices to shift goods.
Over the three months to 31 May, Asos said sales rose by 4% to £987.9m, driven by the UK and the US and the resolution of supply chain issues which had dogged its performance over the first half of its year. This “led to an improved stock profile and increased newness and availability”.
But Mr Dunn said: “What is now clear, based on the significant increase in returns rates that we have seen, is that this inflationary pressure is increasingly impacting our customers’ shopping behaviour.”
Asos’s share price plunged by 15% to a 12-year low of 987.5p following the update.
Online clothing retailer N Brown also said rising inflation – which reached a a 40-year high in April – had affected consumer confidence since the start of its financial year when its sales fell by 2.1% to £165.1m in the first quarter.
“Sales volumes since the start of the financial year have been softer, reflecting various well-documented pressures on consumer confidence, which are showing no signs of abating in the short-term,” said N Brown’s chief executive Steve Johnson.
“As these pressures persist, we expect the trading environment to remain challenging and will, therefore, continue to take actions to mitigate the effects wherever possible.”
Meanwhile, Asos announced it had found a replacement chief executive after Nick Beighton resigned last October. Chief commercial officer José Antonio Ramos Calamonte is taking on the top job with immediate effect. He joined Asos nearly 18 months ago from Portugal’s Salsa Jeans.
Asos has also appointed Jørgen Lindemann as its new chairman. Currently a non-executive director, Mr Lindemann will take over the role from Ian Dyson who will step down on 1 August.
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