Online fashion retailers ASOS, Boohoo burdened with returns

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LONDON – British online fashion retailers ASOS and Boohoo warned on Thursday that they are harmed by rising product yields as consumers fight inflation and return to pre-pandemic behavior.

Shares of ASOS fell 24% to 8:28 a.m. GMT after saying it would miss out on profit forecasts after seeing a significant jump in yields in the UK and Europe since April as inflation affected its 20-year-olds.

Shares of Boohoo fell 14% after reporting a drop in first-quarter sales that partly reflected higher returns.

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“We know that the sharp increase in the rate of return during that period occurred at the same time as consumers began to feel the tingling,” analysts told the newly appointed CEO of ASOS, Jose Antonio Ramos Calamonte.

“For example, in the UK, we have seen a sharp rise in rates of return that coincides with an increase in national insurance contributions and rising energy, food and fuel prices.”

But Boohoo CEO John Lyttle said higher return rates, which are 4-6% above pre-pandemic levels, are more related to returning customers to pre-pandemic coronavirus behavior.

“During the pandemic, we all wore a sports suit, a looser cut, less sensitive to the cut, and now we are obviously back to dresses, and especially casual dresses tend to be a little tighter,” he told Reuters.

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“So you have a higher rate of return that comes with that change from sports entertainment to dresses.”

ASOS CEO Matt Dunn said that free refunds are a decision made “without regret” to optimize the offer for customers. “We still believe that free returns are a key part of our offer.”

Returns are the latest problem to hit the online fashion retail model, which has already been hit by supply bottlenecks, slower product deliveries and higher transport and labor costs.

Last week, Swedish online clothing pure-play Boozt warned of profit.

In contrast, H&M, the world’s second-largest fashion retailer, announced a 17 percent jump in sales in March and May, which is projected to join Inditex’s main rival in reporting rising demand as pandemic limits eased.

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ASOS said it expects revenue growth of 4% to 7% in the year to the end of August, with adjusted pre-tax profit between £ 20m and £ 60m ($ 24-73m).

Analysts had predicted a profit of 83 million pounds, according to the consensus drawn up by Refinitiv.

Shares of ASOS fell 82% year-over-year, while shares of Boohoo fell 83%.

Boohoo’s revenue fell 8% to £ 445.7 million in the three months to May 31.

Sales in the UK fell 1%, but returned to growth in May.

However, the group said its international performance continues to be affected by increased delivery times, with sales falling 28% in the United States, 9% in the rest of Europe and 15% in the rest of the world.

Boohoo warned last month that sales would fall in the first quarter. She predicted a return to growth in the second quarter and improved performance in the second half.

On Thursday, he kept his guidelines for the whole year. ($ 1 = £ 0.8234) (Reporting by Paul Sandle, editors Elizabeth Piper, James Davey and Mark Heinrich)

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