Markets Live, Wednesday, 13 October, 2021

The British online retailer ASOS reported its results overnight and warned its 2022 profit could fall between 30 per cent to 40 per cent due to industry-wide supply chain disruption.

This could have a knock-on impact to Australian retailers and deliveries, where the local postal service has been struggling to keep up with parcel deliveries.

Containers ships around the world have struggled to dock at major ports due to the vast increase in online shopping during lockdowns. This has led to a massive backlog of cargo moving around the globe.

The shipping industry in under pressure. This photo shows cargo waiting to be loaded onto boats in Shanghai.

The shipping industry in under pressure. This photo shows cargo waiting to be loaded onto boats in Shanghai.Credit:Bloomberg

Bottlenecks at container terminals around the world and shipping container shortages have gotten worse, especially at China’s Yantian port in Shenzhen.

The logistics problems have taken a toll with ASOS chief executive Nick Beighton is stepping down after six years in the job.

According to a report in Bloomberg, chairman Adam Crozier also stepped aside, stating the business needed a “fresh pair of eyes” after the pandemic wrecked havoc with its share price and supply chain.

ASOS has performed well through the pandemic, particularly in the UK where comparable sales have grown 66 per cent since 2019. However, with longer lead times and constrained supply from partner brands expected to remain through the next year, ASOS now expects 2022 full year profit to be 30-40 per cent lower than 2021.

Macquarie research says delivery delays will continue locally with Australia Post inundated with packages from online shopping.

The broker note says ASOS experienced market share declines in Australia where standard delivery reached more than 30 days in recent weeks.

Wait times are expected to ease as shops reopen and courier drivers return to work after enforced lockdowns, particularly in some Sydney suburbs.

“Positively, ASOS did note local competition has increased promotional activity with advantageous delivery propositions, and we suspect Wesfarmers’ Kmart Group has remained resilient in its home market,” the note says.

“ASOS’ gross margins have also reduced 200 basis points to 45.4 per cent due to increased inbound freight and duty costs. However, to mitigate future impacts, ASOS has entered long-term freight contracts with rates secured at significantly lower levels than the current market.”

Read More: Markets Live, Wednesday, 13 October, 2021

2021-10-13 02:49:46

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