Lead Forensics

ASOS blames warehouse reorganisation on falling profits

Online clothing retailer ASOS’s profits fell by 68% in its 2018/2019 financial year. In a company statement, it blames this on inadequate preparation for its warehouse network restructuring, which resulted in limited stock availability.

The issues caused by not fully preparing for their warehouse expansion saw ASOS neglect its core product development, presentation and customer service operations.

Though profits fell, ASOS increased the number of active customers by 10%, and orders increased by 12% in Europe and 9% in the US.

Major high street fashion retailers such as Crew and Joules have experienced a rapid increase in online orders, which has meant, like ASOS, reorganising their warehouses to cope with demand. Reorganising warehouses is more than just ordering more heavy duty garment rails to hold the extra stock, however; online customers expect rapid delivery of orders. They cannot try clothes on before buying, so often order more clothes than they need in different sizes and styles. This means that returns are high, and warehouse systems must efficiently and quickly sort returned garments and process refunds.

Reorganising warehouse systems are not easy, and if it is not done correctly, it affects profits, especially if high-demand items are out of stock.

ASOS is convinced that these issues are temporary, and investors have expressed confidence that solutions will be found. They have not been put off buying ASOS shares, which went up 16% last Wednesday. The company is not in financial difficulty and made a profit of £33m in its last financial year.

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