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ASOS warns on profit again, blames overseas warehouse problems

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By Reuters
ASOS warns on profit again, blames overseas warehouse problems
FILE PHOTO: New employees wait in the lobby on their first day of work at the ASOS headquarters in London April 1, 2014. REUTERS/Suzanne Plunkett   -   Copyright  Suzanne Plunkett(Reuters)
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By James Davey

LONDON (Reuters) – British online fashion retailer ASOS <ASOS.L> dented profit expectations for the third time in eight months on Thursday, saying problems in ramping up warehouses in the United States and Germany had hit sales and increased costs.

Shares in the one-time stock market darling plunged as much as 22% in early trading. They were down 12.5% at 0740 GMT, extending losses over the last year to more than 60%.

“Clearly management need to rebuild credibility in their financial guidance,” said analysts at Shore Capital.

ASOS, which sells fashion aimed at twenty somethings, issued a shock profit warning in December, and in March said its new U.S. warehouse was struggling to cope with demand, hitting sales there and adding to challenges in France and Germany.

The group said on Thursday total sales rose 12% to 919.8 million pounds in the four months to June 30, with sales in its United Kingdom and rest of world division robust, up 16% and 14% respectively.

However, in the European Union and the United States sales were held back by operational problems at its new warehouses in Berlin and Atlanta, up 5% and 12% respectively.

“Embedding the change from the major overhaul of infrastructure and technology in our U.S. and European warehouses has taken longer than we had anticipated, impacting our stock availability, sales and cost base in these regions,” said Chief Executive Nick Beighton.

“We are clear on the root causes of the operational challenges we have had, are making progress on resolving them, and now expect to complete these projects by the end of September.”

The group said it was reducing expectations for its 2019 financial year accordingly.

Pretax profit is now expected to be 30-35 million pounds after 50.5 million pounds of transition and restructuring costs.

According to Refinitiv data, analysts had been expecting pretax profit of 55 million pounds. ASOS reported a profit of 102 million pounds in 2018.

For the balance of the year, the group sees sales broadly in line with its year-to-date performance of up 13%. Full-year retail gross margin is forecast to be down 250 basis points year-on-year.

Capital expenditure guidance has been kept at about 200 million pounds, but year-end net debt is now expected to be about 100 million pounds.

“Clearly the warehouse transition in both Europe and the U.S. have seen significant growing pains in recent months, which in our view, have been self-inflicted by the company,” said the Shore Capital analysts.

(Reporting by James Davey; Editing by Kate Holton and Mark Potter)