The online fashion retailer Asos has asked its suppliers for a 3% discount on the clothes and accessories it buys from them, as the company struggles to repair its finances after issuing two profit warnings.
Asos’s share price collapsed last month after a second profits downgrade in seven months. The retailer blamed IT problems at its overseas warehouses.
It has written to its suppliers to ask them to accept 3% less on the price of their clothes and accessories from 1 September, indicating it is still looking to cut costs to improve profitability.
In the letter, which was first reported by the trade magazine Drapers, Asos said it needed a discount to weather the cost of launching warehouses in the US and Germany, which it said were “transformational investments” for the business.
“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,” the letter said. “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.”
Asos told suppliers that accepting lower prices would “fuel joint growth” for both parties.
The Guardian has approached Asos for comment.
The overhaul of its warehousing and supply-chain arrangements has proved more difficult than expected.
Nick Beighton, the Asos chief executive, said in July that the company expected to make profits of £30m to £35m this year as a result, far below City forecasts of £55m and the £102m it reported in 2018.
He said: “The major overhaul of our infrastructure has been bumpier and taken a lot longer than we originally anticipated. We acknowledge that this is a failure in execution.”
Beighton said the problem would be over by September but made no mention of demanding lower prices from suppliers.
