- Complications related to a "major overhaul" of warehousing technology, along with supplier issues related to crossing the Atlantic into the U.S. market, have restricted stock available to Asos e-commerce customers in the U.S. and Europe, according to executives on the British apparel company's recent earnings conference call.
- As a result, sales and margins took a hit in the three months ending June 30. The impact on the bottom line will be in the range of 20-25 million British pounds ($25-31 million), said CFO Matt Dunn. Margins for the entire fiscal year will likely be 250 basis points down due to the costs associated with the tech fixes and price cuts to help retain and win back disappointed consumers.
- The problem involved new automated warehouse management and warehouse control systems. CEO Nick Beighton said the company expects "no improvement" at least into September, as the team works with its tech supplier, which it did not name, to resolve the issue.
The CEO explained the automated elements of the company's warehouse management system and its warehouse control system caused inventory available to customers to decrease significantly.
In Europe, the retailer installed an automated storage and retrieval system. While the system was retrieving product properly, it did not put away new inventory quickly enough "resulting in an inbound backlog." The same glitch also affected returns, further reducing the inventory available to customers.
The German and French markets were the hardest hit. The automated warehouse system also showed some flaws in picking, sometimes leaving items out of orders, leading to order cancellations — a factor that concerned analysts since this may strongly affect consumer attrition.
"We have built some contingency into our plans, of course, but the magnitude of the impact was ahead of our expectations, both in terms of the scale of disruption and the complexity of the issues we faced and hence, time taken to unpick and resolve," said Beighton, adding the inbound issue in Europe is resolved.
In the U.S., the British retailer has been working to build up its brand awareness and offering, and though technology has been less of an issue, the company has struggled to build up an inventory of third-party brands at its Atlanta warehouse, since some of these brands have not shipped to the U.S. before and struggle with compliance issues. The company expects to be at 80% of optimal stock in time for the fall season.