Asos sinks to loss and reveals £14m expected hit from quitting Russia

Online fashion giant Asos has said it expects to take a £14 million hit from its decision to stop selling clothes in Russia, in response to the country’s invasion of Ukraine.

The prediction comes as the retailer said it sank to a pre-tax loss for the six months to the end of February, spending heavily on an overhaul to win over more customers longer term.

Bosses said they saw a marked slowdown in sales during the period as the benefits from the Covid-19 pandemic eased with shoppers able to head back to high streets.

Sales still rose by 1% to £2 billion in the six month period but a £106.4 million pre-tax profit in 2021 turned to a £15.8 million pre-tax loss for the six months to the end of February.

The retailer said it felt the effects of supply chain disruption and limited stock availability and expects the next six months to be more challenging due to inflationary pressures.

But bosses were hopeful that sales growth will accelerate this year, highlighting improvements in stock levels, a return of event and holiday-led demand and an easing of supply chain issues.

Chief operating officer and finance chief Mat Dunn said he was “really happy” with the group’s current stock levels following the period hampered by longer supply times.

“Our stock position is really good going into the second half of the year but there are lots of things we need to continue to do,” he said.

“Our availability on key products has improved since the first half and that’s down to a lot of hard work from our team.”

He added that shipping delays have reduced but freight costs still remain about five times higher than pre-pandemic levels and are one of the firm’s key inflationary pressures.

Losses were attributed to £30.6 million spent on upgrading the business.

These included £7.9 million on launching a new strategy for the fashion retailer, £5.5 million to move from the junior AIM stock market to the main FTSE stock exchange, £18.3 million relating to its Leavesden, Hertfordshire office and £6.4 million due to its takeover of Topshop.

Mr Dunn said: “Asos has delivered an encouraging trading performance, against the continuing backdrop of significant volatility and disruption.”

In the UK sales grew 8% to £895.5 million, although the company admitted it missed out on sales for events in January, however, bosses said it had a strong Christmas period despite the Omicron variant of coronavirus causing uncertainty.

Sales in Europe were up 1% to £577.4 million, where there was greater impact from supply chain problems and Covid-19 restrictions – particularly in France.

And in the US sales rose 11% to £252.7 million, where bosses are hopeful of winning over new business.

This included the successful launch of two physical stores inside department store Nordstrom and plans for two new “retail concepts” in store in February.