As a result of the increased cost of living, clients of the online fashion shop Asos are spending less money on clothing.
In the 12 months leading up to August, the company posted a loss of roughly £32m, compared to a profit of £177m the previous year.
As living costs continue to rise, the company anticipates that consumers will reduce their spending even further in 2018.
In September, inflation rebounded to a level not seen in forty years, people are becoming increasingly worried about their money.
Asos, which owns Topshop and Topman, described the current economic climate as “very tough.”
Asos anticipates a downturn in the UK apparel market over the next 12 months but remains confident in its ability to acquire market share despite this.
The company anticipated a larger loss for the six months ending in February, in part due to the need to reduce prices to clear inventory.
During the epidemic, Asos and its competitor Boohoo, which were viewed as poster children for the transition to online shopping, profited as stranded consumers splurged online. They have struggled, though, as consumers have returned to stores.
Asos reported in June that cash-strapped consumers were returning more online purchases, which negatively impacted the company’s profitability.
The apparel shop stated that it intends to reestablish its once-successful business model by resolving supply chain issues and updating its product lines.
It also stated that it would concentrate on enhancing its US operations.
CEO Jose Antonio Ramos Calamonte stated, “My team and I will fight steadfastly to emerge from these challenging circumstances as a more resilient and nimble organization.”
Asos’s stock, which had fallen 80% this year, increased by 12% on Wednesday to reclaim ground lost over the previous week.
Samantha Mansfield, the head of the strategy, experience, and commerce at the consulting firm Merkle, stated that Asos had not “escaped the cost-of-living issue undamaged.”
“Even this colossal retailer cannot compete with the industry’s financial difficulties,” she remarked.
People are aware that times are difficult, and all brands are dealing with sluggish sales and big spikes in returns.
Richard Hunter, head of markets at Interactive Investor, stated that Asos “concluded a torrid year by swinging to a pre-tax loss as retail realities hit.”
Last week’s news that Asos was negotiating new credit deals was “interpreted as an indication of financial instability,” he said.
Mr. Hunter stated that the rising cost of living and “declining customer confidence” had negatively impacted the company’s success.
