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Price Cuts Hits Asos Profits

Asos, the online fashion retailer has declared weak profits this fiscal year after the trading was hit by an unprecedented discount. In fact, the heat has also affected the online market, as a result of which, the shares of Asos fell by 40% in the trading.

The company stated that the idea to slash the price of the clothes was alluring in the first go but has sabotaged the profits as it hardly affected the intensity of sales. The primary cause to slash the prices at a go was to match with the price tags of the rival, which resulted in the weakest growth of sales in the online clothing store encountered in the recent years. This situation was also contributed by the weaker confidence of the consumers and economic uncertainty.

Nick Beighton, the Chief Executive of the fashion retailer stated that the fashion industry is going through an unprecedented discounting phase, which he hasn’t experienced before. He further mentioned the confidence of the consumers as fragile that has led to the downfall of the shares of the company. He further stated that trading in September and the month after reflected the expectations of the analysts. However, November failed to satiate the expectations with its sales and margin of cash.

The company witnessed the growth in sales between September and November by 14%. However, the wheel turned its direction in November with a steep downfall of the sales. During the initial period of the fiscal year, the company expected the sales to grow in between 20% and 25% from the present year to August 2019 but the expectations have failed. Now, it expects the company to grow only 15%. Meanwhile, the profit margin was also rectified to 2% from 4%. Along with the high discounting, promotional activities also played a crucial part in the drastic downfall of the profits.