The new CEO of ASOS asserts that there is a direct correlation between the rise in the cost of living and the growth in sales, as consumers become more hesitant to make large purchases for fear of falling short.
The stock prices of online clothes retailers ASOS and Boohoo have plummeted after both disclosed rising living expenses.
As a result of a considerable increase in product returns brought on by inflationary pressure affecting its clients in their twenties, ASOS stated that it will fall short of its earnings projections.
It had earlier stated, in April, that it had yet to observe a change in consumer behavior as a result of the rising cost of living.
The company, which has been without a chief executive since Nick Beighton’s unexpected retirement last year, said it projected revenue to increase by 4 to 7 percent in the fiscal year ending in August.
The anticipated adjusted pre-tax profit was between £20m and £60m.
According to a consensus compiled by Refinitiv, analysts had anticipated a figure of £83m.
Matt Dunn, chief operating officer, stated, “It is evident, based on the large increase in return rates that we have observed, that this inflationary pressure is rapidly influencing our consumers’ shopping habits.”
He said that it was too soon to determine how long this will last.
ASOS announced the appointment of Jose Antonio Ramos Calamonte, the current chief commercial officer, as CEO.
During a conference call with financial analysts, he stated that the group-wide increase in returns was not restricted to a single brand, product category, or payment method.
“We are aware that the sharp spike in return rates throughout the period coincided with the moment when consumers began to feel the squeeze,” he explained.
In the United Kingdom, for instance, a substantial increase in return rates coincided with increases in National Insurance contributions and higher electricity, food, and gasoline costs.
In response to the company’s report, share prices fell by more than 20 percent, reaching their lowest level since 2010.
Following its trading report, Boohoo stock dropped by more than 12 percent.
It disclosed the depth of a previously signaled decline in sales, with revenue down 8% to £445.7m in the three months leading up to May.
Boohoo stated that it reflected a difficult comparison with the same period last year, when sales received a pandemic bump and, like ASOS, product returns, but it maintained its full-year forecast.
The company, which offers clothing, shoes, accessories, and cosmetic goods to those aged 16 to 40, stated that it expected sales to increase as the summer progressed.
