Online fashion retailer Asos has reported rapid sales growth, particularly in the UK, where it has benefited from the closures of store-based rivals such as Primark, H&M and Zara.
Group sales rose 23 per cent to £1.3bn in the four months to end-December. In the UK, sales surged 36 per cent — double the rate reported across its previous financial year.
Asos said that, as a result, full-year profit would be at the top end of market expectations, with the additional costs of coping with Covid-19 more than offset by savings in other areas, particularly lower returns.
Mat Dunn, chief financial officer, said UK consumers had “clearly decided they wanted to maximise Christmas”.
The period also included Black Friday, which chief executive Nick Beighton said had gone very well; the company sold more than 1m pairs of jeans, and a dress every two seconds. Its three main warehouses all set new records for items dispatched despite operating under social-distancing curbs.
Gross margins, which reflect only the difference between wholesale cost and retail prices, were lower because of the switch from going-out wear to more casual ranges.
Mr Beighton said sales of Asos 4505 activewear were up 60 per cent while Collusion denim and casualwear sales almost doubled.
“Consumers have become aware of a different product offer at Asos, things like active, sportswear, face and body,” he added.
But such products have lower return rates, which help boost operating profits. The company said it expected “Covid-19 tailwinds” of about £40m in the first half of its fiscal year.
However, over the full year it expected to incur about £15m of tariff costs arising from the rules of origin in the UK/EU trade agreement. Although Asos can serve European customers from its German warehouse, tariffs can still arise on movements of product made in Asia between its UK and EU facilities.
“We have chosen as a business to absorb that cost rather than pass it on to customers and we will be looking to mitigate it,” said Mr Dunn. “It will reduce over time but it will never be zero.”
He added that the tariff bill would have been “substantially higher” but for the investment in the German centre, which also now supplies the Irish market.
Asos shares advanced 1.2 per cent to £52.57 in mid-morning trade on Wednesday, having risen almost fivefold from their March 2020 low.
Analysts said the upgrades to forecasts were based on the strong first half only and it was possible that, if trading momentum was maintained, that further upgrades could follow later in the year.
But the company reiterated previous comments that the economic effects of Covid-19 were likely to be felt keenly by the 20-somethings who are Asos’s main customers.
“We’re not sure how this will pan out in January and February,” Mr Dunn cautioned. “[36 per cent] was a very strong number and I’m not sure we would see this as sustainable going forward.”
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