Asos to reveal sales impact from tightened household budgets

Asos will reveal to investors next week how much its sales have been impacted by tightened customers budgets amid the ongoing cost-of-living crisis.

The group is among online retailers to have seen recent strong growth ebb away in 2022 as rampant inflation has caused many shoppers to reassess their spending.

Rivals including Next and Boohoo have cut their trading guidance in recent weeks as a result of waning confidence.

Early last month, Asos also cautioned over profitability after sales fell below expectations in August amid clear signs customers were tightening their belts.

Investors will be hoping for a resilient outlook from the fashion firm on Wednesday when it unveils its full-year results.

Asos, which owns brands including Topshop, is expected to report adjusted pre-tax profits close to £20 million for the year to August 31.

Last month, the group said it was witnessing “the impact of accelerating inflationary pressures on consumers and a slow start to Autumn/Winter shopping” after a positive summer.

Rival Next highlighted earlier this month that its own performance rebounded somewhat in September amid back-to-school sales, and Asos shareholders will be hoping for a similar story.

Nevertheless, analysts have highlighted that the current economic backdrop continues to pose an uncertain outlook for Asos.

“It’s difficult to imagine that trend reversed given the macro environment has only deteriorated since then,” said Laura Hoy, ESG and equity analyst at Hargreaves Lansdown.

“That doesn’t bode well for the group given return rates were also on the rise.

“It would be good to get an update on how the group’s dealing with the excess stock that comes along with elevated returns—to much discounting could damage brand power and set the tone for margin erosion in the longer-term.”

The e-commerce group is also expected to post total sales growth of 2.8% for the latest financial year, with analysts predicting that this will accelerate next year as it rebounds from the post-pandemic cool-down in online transactions by customers returning to high streets.

New chief executive officer Jose Antonio Ramos will have a significant challenge to spark significant growth given the economic climate, particularly amid continued rises in costs.

Shareholders will be hoping the group can highlight success in securing cost efficiencies in recent months while there have also been signs of easing cost pressures on freight and elsewhere in global supply chains.