Asos PLC on Thursday lowered annual guidance after its third quarter was hit by inflationary pressures and a high clothing return rate, though the online retailer successfully ended its search for a new chief executive.

Asos shares plunged 20% to 930.00 pence each in London on Thursday morning.

It has promoted Chief Commercial Officer Jose Calamonte to chief executive and also lifted Non-Executive Director Jorgen Lindemann to the role of chair.

In the three months to May 31, Asos said revenue declined 0.5% to £983.4 million from £987.9 million a year earlier.

‘Gross sales accelerated; however net sales were impacted by a significant increase in returns rates in the UK and Europe towards the end of the period, reflecting inflationary pressures on consumers which has a disproportionate impact on profitability,’ Asos explained.

Total UK sales rose 3.8% year-on-year in the three-month period, US sales increased 21%, though EU sales fell 5.2% and Rest of the World sales fell 20%.

Gross margin narrowed by 310 basis points to 44.0%.

For the nine months ended May, revenue is up by just 0.8% on-year at £2.99 billion, a far cry from the sort of growth Asos enjoyed at the height of the pandemic, as bricks and mortar competitors had their stores shuttered by lockdowns.

‘At our half-year results, we set out the actions we had taken as we faced into a more challenging backdrop, notably the work undertaken in the face of the global supply chain challenges which led to an improved stock profile and increased newness and availability. We saw the benefit of this come through in the shape of strong gross sales and a further acceleration of growth in the US. At the same time, we noted that the impact of inflationary pressures was yet to be felt by our customers,’ Chief Operating Officer Mat Dunn said.

‘What is now clear, based on the significant increase in returns rates that we have seen, is that this inflationary pressure is increasingly impacting our customers shopping behaviour. It is too early to tell for how long the current pattern of customer behaviour will continue, but we are taking swift and decisive steps to minimise the impacts.’

Looking ahead, Asos said full-year sales are now expected to grow in a range of 4% to 7%, ‘reflecting market volatility and an increased returns rate’. It expects to take a gross margin hit of between 150 basis points and 200 basis points amid elevated returns. Adjusted pretax profit was given in a new range of £20 million to £60 million.

In January, and before the outbreak of war in Ukraine, Asos had guided to revenue growth around 10% to 15% and adjusted pretax profit of £110 million to £140 million.

Asos, freshly transferred to the London Main Market from AIM, is set to join the FTSE 250 index on Monday next week.

It will do so with a new chief executive at the helm. Calamonte takes on the role and joins the firm’s board immediately.

He replaces Nick Beighton who stepped down in October as part of a management shake-up.

Calamonte brings long retail experience with him, having worked in the industry for 18 years. He led the commercial strategy of firms including Zara-owner Inditex SA and Carrefour SA’s Spanish arm, and he joined Asos from Portuguese fashion brand Salsa Jeans, where he was CEO.

‘Jose has made a significant impact at Asos since he joined to lead the commercial function in January 2021, taking responsibility for driving Asos’s product and trading strategy globally, encompassing design, sourcing, garment technology, buying and merchandising, global trading, Asos Studios and creative,’ Asos said.

Lindemann, meanwhile, will become chair from August 1, replacing Ian Dyson. Dyson had planned to leave the post once a new CEO was appointed. Dyson has been on the Asos board since October 2013.

Lindemann joined Asos’s board on November 1.

Asos was not the only online retailer recently hit by high clothing return rates and inflation. boohoo Group PLC on Thursday said it has been hurt by an ‘ongoing normalisation of returns’ and noted a ‘significant inflationary backdrop’, forcing it to tightly control costs.

Unlike Asos, however, boohoo left annual guidance unchanged.

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