Online fashion giants Asos and Boohoo are feeling the heat due to the cost of living crisis: a reaction

The trendy group, whose name is abbreviated to As seen on the screen, reduced its outlook on sales and profits after seeing a sharp rise to regain how consumers curb consumption. Sales in the UK rose just 4 per cent to £ 431.8 million in the third quarter as of May 31 as return rates rose as the group’s total revenue fell to £ 983.4 million from £ 987.9 million a year earlier.

It now expects year-round sales to grow by 4 to 7 per cent with a baseline pre-tax profit of between £ 20m and £ 60m.

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Chief Operating Officer Matt Dunn said: “What is now clear, based on the significant increase in rates of return we have seen, is that this inflationary pressure is increasingly influencing our shopping behavior.”

The warning came when the group promoted CEO Jose Antonio Ramos Calamonte to the top position and appointed non-CEO Jorgen Lindemann as president in full swing at the helm.

Laura Hoy, a capital analyst at financial services group Hargreaves Lansdown, said: “Expectations were relatively low for Asos and the group confirmed market fears with a full-year profit warning. With rising rates of return, the group expects to rely on promotional activities to clean up its warehouses.

“The question now is how long it will take for shopping trends to normalize. Retail is probably one of the last sectors to feel inflation as consumers continue to refresh their wardrobe after Covid.

“Plus, given that the holidays and events are finally back on the agenda, there is still a need for appropriate clothing. But these demand drivers are getting weaker. ”

Asos, whose name means As Seen On Screen, was founded more than two decades ago and has grown into one of the biggest success stories of online retail in the UK.

Meanwhile, rival online fashion firm Boohoo revealed a drop in sales in the past quarter as it fights fierce competition and higher rates of return.

Revenue fell 8 per cent to £ 445.7 million in the three months to the end of May, compared to the same period last year. Sales in the UK fell 1 per cent, but the firm was particularly hard hit by a sharp drop in other parts of Europe and the US.

Still, Boohoo said he is optimistic as its UK sales improved month on month compared to the quarter and returned to net sales growth in May.

Harry Barnick, a senior analyst at Third Bridge, remarked: “Boohoo’s impressive growth has stalled, dampened by inflation and rising cost of living as consumers begin to tighten their money.

“Challenges in sales are aggravated by incredible fares and inflation in raw material prices. Boohoo now faces the challenge of increasing prices in a promotional and highly competitive market.

“Medium-digit margin pressure could be experienced in the short term as Boohoo learns how to deal with the new operating environment.”

He added: “Our experts say Boohoo will need to find creative ways to cut costs. Improving purchasing costs through the consolidation of fabrics and production sites is key to the success of this cost-cutting strategy. ”

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