City reaction: Asos on rebound as four-month sales push past £1 billion

Founded 20 years ago, the UK firm has become an internet success story. Picture: Contributed
Founded 20 years ago, the UK firm has become an internet success story. Picture: Contributed
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Online fashion retailer Asos saw its revenues push through £1 billion in the final four months of the year as it was boosted by record Black Friday takings.

Releasing a trading update, the firm – whose name is short for As Seen On Screen – said retail sales hit £1.07bn in the period ending on New Year’s Eve.

Total group revenues, which also includes sales from third parties, rose to almost £1.11bn. Both measures were 20 per cent up on the year before.

The group said it had managed to “rebuild customer momentum”, especially due to its best Black Friday on record. It did not reveal what proportion of its clothes were sold at a discount, or what sales were on the day.

Asos kept its outlook for the full year unchanged, and said it would focus on trying to retain the new customers who have started using its website.

UK retail sales rose 18 per cent to some £409 million, while international retail sales leapt 22 per cent, including a 23 per cent surge in the US. It means that the UK’s share of retail sales stands at 38 per cent, down marginally on a year earlier.

The UK company, which was founded 20 years ago and is primarily aimed at young adults, has been steadily building up its global presence.

The firm shipped 27.7 million orders in the four-month period, a 20 per cent increase on the same period in 2018. Meanwhile, 23 per cent more visits to its website were clocked up.

EU retail sales rose 21 per cent to £332.5m.

Chief executive Nick Beighton told investors: “Asos has delivered an encouraging start to the year. Strong customer acquisition activity supported by robust operational performance has driven good momentum in all our markets.

“As we said in October, the focus for this year is to further enhance our capabilities and leverage the investments we have made.

“It is still early in the year and much remains to be done, but we are encouraged by the progress we have made so far. We remain confident in our ability to capture the substantial opportunity ahead of us.”

Challenging

Arlene Ewing, investment manager at wealth management firm Brewin Dolphin, said: “The past year has been a challenging period for Asos, with profits warnings and well-publicised operational issues.

“As a result, investors have had to contend with a degree of volatility in the shares, which are down more than 50 per cent on their 2018 peak.

“However, there appears to be some good news in the form of considerable sales growth across Asos’s divisions.

“The company’s ambitious expansion plans will inevitably lead to additional cost and complexity, which no doubt contributed to the teething problems earlier this year, and there is still work for management to do if it is to catch up on rival Boohoo.

“Nevertheless, this is the first sign of encouragement that the company is returning to form.”

Analysts at Shore Capital noted: “This is a reassuring trading update with a beat to revenue, offset by increased gross margin investment. The trick will be in getting balanced growth to leverage the group scale and rebuild operating margins from the low point of 1.2 per cent, back towards 4 per cent over time.”

Richard Hunter, head of markets at Interactive Investor, said: "After a woeful 2019 which included profit warnings and warehouse outages, investors were hoping that October's full-year numbers marked a line in the sand. Based on this update, the early indications are that this might be the case.

"Asos has certainly impressed with this update, but the market consensus of the shares as a hold is likely to remain in place until the company can show that this performance represents a new trend, rather than a blip."

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, noted: "Asos made it through the festive season without signalling a distress call. Not only that but sales were better than expected, which will come as a pleasant surprise. This time around a record Black Friday provided a serious shot in the arm to sales, which is in stark contrast to 2018 when the occasion was far from a happy time for the group.

"It’s hard to view these numbers as anything other than a step in the right direction. But the hard work isn’t over, with competitive pressures still lingering. We think Asos is focusing on the right things, but many investors will just be relieved the group’s been able to deliver a strong quarter."

READ MORE: Asos profits dive 68% on back of warehouse woes