ASOS, an online fashion retailer, is hit with problems of delayed shipments of orders as the demand in the United States exceeded the company's expectations. The backlog encountered by the company impacted its momentum in the market.
The overall total sales of the company increased by 11 percent as it reaches £1.28 billion in the six months until February 28. The trading update from the group said that sales growth in the United Kingdom rose by 12 percent despite the company's continuous struggle in their two leading markets, France and Germany.
The update said that the groups' total number of orders placed during the second quarter is 17.3 million which is 15 percent higher compared to last year during the same period. Nick Beighton, ASOS' chief executive, said that their retail gross margin guidance for the year remains. He added that they will be increasing investment in price and marketing in the second half, particularly in France and Germany.
The executive also said that, given the actions that they are taking together with an improving US performance, they believe that the group will deliver stronger growth in the second half and, consequently, they remain confident that they will meet guidance for the full year. The group announced that its sales growth prediction for 2019 remains unchanged at 15 percent.
According to reports, ASOS failed to employ enough workers at its new warehouse in Atlanta to deal with an unprecedented rise in demand across the United States.
After the company's success in the United Kingdom, its biggest and most mature market, leaders and investors in the company turned their expansion abroad. One of the key markets for ASOS is the United States because of its size and wealth which makes it very lucrative.
The firm started its operation in the United States in 2012 where most of its customers were served from its giant warehouse in Barnsley. The company decided to build a new distribution center in Atlanta because shipments to a far destination like Los Angeles are costly and time-consuming. The construction of the warehouse cost the company US$40 million where it started its initial operation in 2018 before going fully operational this February.
The company found that they needed additional workers to be added to its current 700 warehouse employees when they decided to shift all of its United States distribution to Atlanta. Liberum, a City broker explained that the logistical and software solution was not a problem, but 700 people could not cope with the level of demand experienced.
