Online fashion giant Asos said it suffered from the spread of the Omicron variant of coronavirus as supply chains were squeezed and revellers stayed indoors.

Sales in the four months to the end of December rose just 2% to £1.4 billion and profits took a dent as the retailer was forced to discount heavily and spend more on shipping goods to its warehouses.

Rising inflation also meant Asos increased its prices in the “low to mid-single digit” range as costs to the business rose.

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However, these were not enough to offset the falling profits.

Asos said sales in Europe were particularly hard hit, falling 3% to £390 million, with several countries across the continent imposing strict lockdowns.

This led to fewer sales of dresses and outfits for going out; however, the UK put in a stronger performance where fewer restrictions were imposed.

Sales in the UK rose 13% to £645 million in the four months to the end of December.

In the US there was a 7% increase in sales to £172.6 million “despite significant port congestion and supply chain disruption inhibiting our ability to fully service demand”, the company added.

Overall, gross margins on sales were cut by 4% due to “heightened clearance activity” to sell off poor-performing spring and summer products.

There were also hits from “elevated freight costs and use of air freight to circumvent supply chain constraints and maximise peak trading”.

Bosses said they expect supply chains to improve later this year.

Asos said sales were weaker in Europe (Asos/PA)

During the period Asos said it launched a pilot partnership with Adidas and Reebok in the UK, which will now be expanded across Europe.

The Topshop brand outperformed for the retailer since it was bought from administrators and is up more than 200% year on year.

And bosses flagged that a line of products being sold in Nordstrom department stores in the US are performing strongly.

Looking ahead, the company said the Omicron Covid variant continues to cause uncertainty, but underlying pre-tax profits are still expected to be up around 10% to 15% at between £110 million and £140 million.

Separately, Asos announced plans to leave the junior AIM London Stock Exchange and join the FTSE main market next month.

Chief operating officer Mat Dunn said: “We continued to make progress against our objectives to improve the flexibility and speed of our retail model and accelerate the pace of delivery of our international growth strategy.

“Looking ahead, while mindful of the near-term uncertainty relating to the pandemic, our guidance for the full year remains unchanged.”