Asos hails solid Christmas but US growth eases

Asos, the online fashion darling, has flagged weaker growth in Australia and the United States, two of its key markets, overshadowing news of bumper Christmas sales.
Asos has been a success story in British retailing. Picture: ContributedAsos has been a success story in British retailing. Picture: Contributed
Asos has been a success story in British retailing. Picture: Contributed

The group, founded 14 years ago by current chief executive Nick Robertson, has been a success story in British retailing with its trendy clothing lines targeted at “fashion-forward twenty somethings”. It has attracted high-profile fans including US First Lady Michelle Obama and singer Rita Ora.

But investors, who have seen the share price more than double over the past year, have become sensitive to signs of any slowdown in the firm’s meteoric rate of growth.

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The group rang up retail revenues of £335.7 million in the four months to the end of December, up 38 per cent on a year earlier, with analysts expecting it to smash through its £1 billion turnover target by the end of August.

UK sales leapt by 37 per cent to £133.7m, with international sales up 38 per cent to £202m. Sales in Europe were particularly robust with growth of 69 per cent. However growth in the key US market slowed to 28 per cent from 59 per cent in the previous three months, reflecting a tougher market for clothes aimed at young people.

Growth in the group’s “rest of world” division, which includes Australia, China and Russia, eased to 19 per cent from 26 per cent.

Robertson said the segment was being dragged down by Australia, where the local currency has strengthened against the pound.

Independent retail analyst Nick Bubb said: “Though the impressive UK outcome should certainly be seen as reassuring, some people will be fretting about the overseas slowdown.”

Freddie George, retail analyst at Cantor Fitzgerald, described trading at the group as “impressive, but broadly in line with market expectations”.

He added: “We believe the company will focus on a limited number of markets with a view to making them as significant as the UK rather than taking a scatter gun approach to global expansion.”

Asos, which stands for “As Seen on Screen”, said the first week in December was its strongest as shoppers stocked up on party dresses for the festive season. Oversized coats and Christmas jumpers were other best sellers.

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The firm said it benefited from recent efforts to improve its service, having introduced free delivery and returns and an extended 9pm cut off for next day delivery in the UK.

Robertson said: “We have enjoyed another strong Christmas and made a good start to the financial year.”

He said the company was on track to hit its £1bn-a-year sales goal one year ahead of target, adding that he was comfortable with analysts’ consensus forecast for underlying pre-tax profit of £71m, up from £54.7m the year before. Shares fell 3.1 per cent to close at 6,650p.

Asos’ sales performance provides a further sign that the festive season was a stellar one for online retailers and those with a strong internet presence. Figures from the British Retail Consortium last week showed web sales grew at the fastest pace for more than three years in December.