ASOS share price: what’s the outlook as suppliers squeezed to cut costs

The online fashion retailer has told suppliers that it requires a 3% discount on items it buys from them to drive cost savings and improve its balance sheet.

ASOS has reached out to its suppliers to request a 3% discount on clothes and accessories it buys from them to help reduce costs and help strengthen its balance sheet after issuing two profit warnings.

In a letter, first reported by trade publication Drapers, the online fashion retailer told its suppliers that it required a discount from them to help offset ‘transformational investments’ it has made in the US and Germany, where it opened large warehouses.

‘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,’ ASOS wrote. ‘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.’

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ASOS share down 40% since April

Since hitting a year-to-date high of £40.66 a share in late-April, the stock has fallen more than 40%, with it trading at £24.36 as of 11:35 GMT on Friday.

The online fashion retailer has seen its share price tumble after issuing its second profit warning in seven months back in July, with its CEO Nick Beighton forced to tell shareholders that the company expects to make profits of £30 million to £35 million this year as a result.

‘The major overhaul of our infrastructure has been bumpier and taken a lot longer than we originally anticipated,’ Beighton said. ‘We acknowledge that this is a failure in execution.’

City analysts had initially forecast ASOS to generate profit of £55 million this financial year, with the retailer recording profit of £102 million in 2018.

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