As consumers struggle with inflation and return to pre-pandemic behavior, British online fashion retailers ASOS (ASOS.L) and Boohoo (BOOH.L) issued a warning, sending their shares down.
ASOS shares hit 29% by 1049 GMT after it would miss profit forecasts due to a spike in returns in the UK and Europe. Over the latter part of its quarter to May 31, with inflationary pressures exacting a toll on its 20-something customers. Boohoo shares were down 14% after it reported an 8% dip in first-quarter sales that partly reflected higher returns.
Returns are a big problem for an online fashion retail model already battered by supply bottlenecks. Slower product deliveries and higher freight and labour costs. Higher returns add to warehousing and delivery costs and mean increased markdowns and labour inefficiency to clear the returned stock.
ASOS said the higher returns in the UK had offset a strong performance in occasion-wear amidst an uplift in demands.
Boohoo CEO John Lyttle said its higher returns, running 4-6% above pre-pandemic levels, were more about its customers returning to pre-pandemic buying patterns.
ASOS’s third quarter revenue rose 4% to 983.4 million pounds. And it forecast full year growth of 4% to 7% in the year to end-August, with adjusted pretax profit coming($24-$73 million).
Analysts had anticipated profit of 83 million pounds, according to a consensus compiled by Refinitiv. Boohoo’s first quarter revenue fell 8% to 445.7 million. UK sales fell 1%, but returned to growth in May. It maintained its guidance for the full year.
Boohoo had warned last month that sales would fall in its first quarter. It forecast a return to growth in the second quarter and improved performance in the second half.
-Reuters.
