Asos sales surge despite high street reopening but Covid caution remains

Online fashion darling Asos has voiced caution over how the pandemic will play out with further volatility expected but bosses remain optimistic for the future of the growing global business.

The retailer, whose name stands for As Seen On Screen, said profits were being squeezed in part due to increased freight costs and global supply chain disruption.

However, the group highlighted an ever-growing demand for online clothing and a boom in sales during the four months to the end of June, despite high streets reopening as lockdown restrictions on non-essential retailing eased.

Consumers have also taken advantage of the recent lockdown easing, with dresses and “occasion wear” rising in popularity.

Asos was founded more than two decades ago and has grown to become one of the UK's biggest online success stories.

In an update to the stock market, Asos noted: “Trading in the last three weeks of the period was more muted, as continued Covid uncertainty and inclement weather, particularly in the UK, impacted market demand.

“We anticipate a measure of volatility to continue in the near term, given the rapidly evolving Covid situation worldwide.”

It added that there was a strong performance in the UK, with increased promotional activity to capture the available demand for its “compelling product offer”, despite the reopening of physical stores early in the period.

Sales in the four months to June 30 jumped 31 per cent to £1.29 billion on a reported basis, including a 60 per cent rise in UK sales to £526.4 million – the strongest growth of any of its markets.

The US experienced sale growth of 31 per cent to £144.8m – although this was helped by currency fluctuations in the group’s favour – and the EU was slower at 20 per cent growth to £388.3m.

Chief executive Nick Beighton said: “Asos has delivered another strong performance against a backdrop of continued social restrictions and global supply chain pressures.

“Although mindful of the continued impacts of the pandemic on our customers in the short term, we believe that the structure of the global e-commerce fashion market has changed forever, which will drive an increase in online fashion sales over the long term.

“We’re excited about the size of the prize ahead of us and the opportunity of delivering on our ambition of being the number one destination for fashion-loving 20-somethings.”

John Moore, senior investment manager at wealth management firm Brewin Dolphin, said: “Asos continues to grow – with the exception of sales beyond the UK, Europe, and the US – but that has become standard for the e-commerce platform and there are plenty of notes of caution in today’s statement.

“Issues around certainty of supply and demand in a changing Covid-19 outlook are likely to make the next couple of quarters a little unpredictable for investors.”

Sophie Lund-Yates, senior equity analyst at financial services group Hargreaves Lansdown, noted: “Next quarter will be crucial because it will give a better indication of the sales pace Asos can achieve in more normal times. By that point there should be even more clarity on social activity, and a clearer view of the shape of Asos’ future should come into focus.”

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