Asos warns of $32 million no-deal Brexit hit after profit soars

Asos Plc warned it could face a 25 million-pound ($32.3 milliion) hit from tariffs in the event of a no-deal Brexit, even as it gets a boost from more consumers shopping from home during the pandemic.

The online fast-fashion chain said the figure could potentially be higher as it had not included any assessment of the cost of managing additional paperwork if Britain fails to secure a trade agreement before the end of the transition period for leaving the European Union.

The company disclosed the estimate as it reported strong gains in sales and profit following a surge in online clothes shopping during the pandemic. Investors were worried by the retailer’s cautious outlook, however, and its shares fell as much as 10% in London.

Profit more than quadrupled in the latest year, to 142.1 million pounds, on revenue that jumped 19%. Gains were fueled by increased orders, lower capital expenditure and fewer returns, reducing costs.

Asos said it expects underlying profit to increase in the current year but remains cautious because of the weaker economic prospects for its core customer base of young shoppers.

In a nod to the changing outlook for that demographic group, Asos will launch a new brand, AsYou, in two weeks with products priced between 8 pounds and 28 pounds.

The lower pricing will step up the company’s already fierce competition with rival Boohoo Group Plc, which is known for selling dresses for as little as 5 pounds. Britain’s fast-fashion industry has been in focus during the pandemic following reports of labor abuse at factories in Leicester supplying Boohoo.

Asos has been increasing production from suppliers in Leicester in the past three years. The new brand “will stay true to our ethos and design-led approach,” Chief Executive Officer Nick Beighton said.