Fallen online fast fashion retailer ASOS (ASC:AIM) has asked suppliers to swallow discounts on its orders as the one-time AIM darling seeks to cut costs and fend off short-sellers following a slew of profit warnings.

According to Drapers, ASOS penned a missive to suppliers to request a three per cent discount in prices on all stock it receives after 1 September. It argued the ‘necessary change’ in payment terms would ‘fuel joint growth’ for ASOS and the brands it stocks alike.

WE’RE IN THIS TOGETHER

In the letter to suppliers, seen by Drapers, Asos highlighted the launch of warehouses in Atlanta and Berlin as ‘transformational investments’ for the business. Operational issues arising from its ongoing warehouse transformation programmes in the US and Germany were behind ASOS’ latest earnings downgrade, which you can read about in detail here.

The letter said: ‘We have recently reviewed the current status of our supplier arrangements, also taking into account the significant investments we have made over the last few years and will continue to make, to lay the foundations for future growth.

READ MORE ABOUT ASOS HERE

‘We have set our sights on becoming one of the few companies with truly global scale in the market, and we are confident that we will achieve this.

‘Our future growth aspirations not only benefit us but also benefit you, our valued partner. We hope you will understand this necessary change and on behalf of Asos we would like to thank you for your continued support.’

FALLEN ANGEL

Shares in ASOS have slumped 70% from their March 2018 peak of £77.30 to £23.38 following a trio of profit warnings within a year. Clothing industry conditions are ultra-competitive and ASOS’ growth has moderated materially while ambitious pure-play online rival Boohoo (BOO:AIM) is positively flourishing.

ASOS’ total retail sales grew by 11% in the four months to 30 June with UK sales up 16% and the rest of the world segment showing robust growth of 14%. Disappointingly, however, sales in Europe and the US were held back by the aforementioned warehouse operational issues and poor stock availability.

For now at least, full year pre-tax profit is expected to be in the £30m to £35m range, significantly down from earlier forecasts of £55m.

In the wake of these confidence-draining earnings alerts, ASOS has attracted interest from short-sellers who reckon even these estimates are too optimistic and hope to profit from any further downwards lunges in the share price.

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Issue Date: 20 Aug 2019