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Asos and Boohoo Customers Can’t Break This Bad Habit

Returns are up at Asos and Boohoo as both British e-tailers struggle to manage an onslaught that spurred rival Zara to begin charging a fee in hopes of driving shoppers to stores where there’s no charge to process these transactions.

Asos

In a Nutshell: Asos reported a “significant increase in returns rates” in the UK and Europe toward the close of its reporting period. It said stronger gross sales ultimately suffered as returns weighed on net sales and inflation dinged profits.

Asos said it’ll have to mark down more product as a result of the returns surge. And it doesn’t see any end in sight for the mountain of returns it’s handling.

The company is planning for 4 percent to 7 percent sales growth, with adjusted profits before taxes (PBT) in the range of 20 million pounds to 60 million pounds ($24.6 million to $73.9 million) for fiscal year 2022 ending Aug. 30. That’s lower than October’s $110 million pounds ($150.1 million) to 140 million pounds ($191.0 million) PBT forecast. The outlook accounts for losses in Russia following the nation’s Ukraine invasion.

Asos is looking for growth with its new Nordstrom partnership and a trial with secondhand apparel platform Thrift+.

Asos appointed José Antonio Ramos Calamonte to the chief executive role, after he joined the company last year as chief commercial officer following a two-year stint as CEO of Portuguese denim maker Salsa Jeans. Matthew Dunn, chief operating officer and chief financial officer, has been leading the C-suite since former Asos CEO Nick Beighton stepped down in October. Jørgen Lindemann takes on the chairman role on Aug. 1.

Net Sales: For the third quarter ending May 31, total group revenue was essentially flat, dipping slightly to 983.4 million pounds ($1.21 billion) from 987.9 million pounds ($1.22 billion) in the year-ago period, on a constant currency basis.

COO’s Take: “What is now clear, based on the significant increase in returns rates that we have seen, is that this inflationary pressure is increasingly impacting our customers shopping behaviour,” Dunn said. “It is too early to tell for how long the current pattern of customer behaviour will continue but we are taking swift and decisive steps to minimise the impacts whilst continuing to deliver against the strategic initiatives we laid out in November that will ensure that ASOS builds for the long-term.”

Boohoo

In a Nutshell: Boohoo last month called out an uptick in customer returns, and said shipping costs and international delivery delays will likely affect its performance over the next several months. The company settled a $100 million class-action lawsuit in California alleging that it used fake promotions to mislead customers.

While gross sales rose 9 percent year-on-year, returns weighed on net sales.

Boohoo reiterated its commitment to near-shore sourcing in order to use less air freight. It said it “tightly controlled” inventory and overhead costs in light of inflation in the period. It expects its Sheffield facility to be fully automated by the second half of the year. It signed a lease for a new distribution center in Elizabethtown, Penn. that should be online in the middle of next year and better support U.S. fulfillment.

Boohoo expects low-single-digit revenue growth for the year and a return to growth in the second quarter. It expects inflation to drag on supply chain costs.

Net Sales: Total group revenues for the first quarter ended May 31, 2022, fell 8 percent to 445.7 million pounds ($549.2 million) from 486.1 million pounds ($599.0 million).

CEO’s Take: “We have seen promising signs from the Group’s sales performance in the UK, which has improved month-on-month in the period and we are looking ahead towards our key summer trading season as holidays ramp up and customers look to the latest fashion from across our brands,” Lyttle said. “Looking forward, we will continue to focus on optimising both our financial and operational performance to ensure the business is well placed to take advantage of future growth opportunities.”

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