Live Markets, Wednesday 13 October 2021
British online retailer ASOS announced its results overnight and warned that its 2022 profit could drop by 30 percent to 40 percent due to industry-wide supply chain disruption.
This could have a knock-on effect on Australian retailers and delivery, as the local postal service has been struggling to keep up with parcel deliveries.
Container ships around the world have struggled to dock at major ports due to the massive increase in online shopping during lockdowns. This has led to a massive backlog in the movement of goods around the world.
The bottlenecks at container terminals around the world and the shortage of shipping containers have worsened, especially in the Chinese port of Yantian in Shenzhen.
Logistical problems have affected the resignation of ASOS CEO Nick Peyton after six years in the job.
According to a report in Bloomberg, Chairman Adam Crozier also stepped down, stating that the company needed “new eyes” after the pandemic wreaked havoc on stock prices and the supply chain.
ASOS has done well during the pandemic, particularly in the UK where similar sales have grown 66 per cent since 2019. However, with longer lead times and limited supplies from partner brands expected to remain over the next year, ASOS now expects a profit 2022 as a whole to be 30-40 percent lower than in 2021.
Macquarie’s research indicates that delivery delays will continue domestically as Australia Post is inundated with bundles of online shopping.
The broker’s note says ASOS has seen its market share decline in Australia with record delivery reaching more than 30 days in recent weeks.
Wait times are expected to decrease as stores reopen and courier drivers return to work after the enforced closure, particularly in some Sydney suburbs.
“Positively, ASOS has noted that local competition has increased promotional activity with beneficial delivery offerings, and we believe Wesfarmers’ Kmart Group has remained resilient in its home market,” the note reads.
ASOS also cut gross margins 200 basis points to 45.4 percent due to increased freight costs and in-house fees. However, to mitigate future impacts, ASOS has entered into long-term, guaranteed freight contracts at levels well below the current market.”