Asos Profits Drop 21% Due to China Investments and Warehouse Expansion

Revenue was up 34 percent for the first half of 2014 but profits sank with the retailer's operating expenses.
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Eliza Brooke
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Revenue was up 34 percent for the first half of 2014 but profits sank with the retailer's operating expenses.
Photo: Asos Magazine

Photo: Asos Magazine

As expected, Asos reported a net profit drop of 21 percent on Wednesday morning, despite revenue rising 34 percent for the six months ending Feb. 28. The cause, according to the UK-based e-commerce site? Investing in warehouse spaces and getting its China startup off the ground.

Operating costs rose 45 percent for the half, with distribution expenses growing 15 percent and representing Asos' biggest expense at this point. The retailer has expanded the footprint of its Barnsley, UK warehouse space by 25 percent.

Investing in warehouses internationally should pay off in the long-term by improving delivery times: Asos opened a China location in November of last year and a new central European facility is slated to open in the second half of 2014. Meanwhile, the retailer's Ohio warehouse is now capable of serving 20 percent of U.S. orders.

International now represents over 60 percent of its sales, and the retailer says that number continues to grow. It seems that it's the right time to invest in heavy-duty delivery chains.