Asos reports weaker August sales as inflation squeezes spending power

Fast-fashion retailer Asos has reported weaker August sales and said that it was “cautious” about the outlook for consumer spending as inflation hits its customers’ spending power.

The UK-based group on Friday said its full-year profit would be “around the bottom end of company guidance” of between £20mn and £60mn, but would be “in the range” of market expectations, with constant currency sales growth of about 2 per cent and net debt at about £150mn.

The retailer said it generated “good growth” in June and July but sales in August were weaker than expected as inflation squeezed consumers’ pockets to herald a slow start to autumn shopping.

UK inflation has picked up this year to a double-digit rate, the highest level in more than 40 years and the highest among G7 countries.

Asos warned on profits in June as it blamed accelerating inflation for an increased rate of product returns. The London-based company then lowered its guidance for adjusted pre-tax profit to between £20mn and £60mn, down from its previous guidance of £110mn to £140mn.

Shares in London-listed Asos have tumbled nearly 72 per cent this year.

Fashion retailers, such as Asos and its rival Boohoo, have struggled since the height of the pandemic as younger shoppers buy more products, try them on at home and return many of the goods bought.

Returns eat into profits for online retailers because processing is largely manual and the returned items often have to be marked down when they are resold.