Fashion firm Asos set to benefit from unlocking but volatile conditions remain

Online fashion giant Asos is this week expected to shed some light on what supply chain disruption and cost pressures mean for sales and margins.

Earlier this year, the firm revealed soaring sales and profits during lockdown as most high street stores remained closed.

The business, whose name stands for As Seen On Screen, said it benefited particularly from strong UK sales during the period, which covered the second English lockdown in November, the subsequent tiering and eventual lockdowns impacting the whole of the UK.

The integration of the Topshop brands, which Asos bought out of administration towards the start of the year, was also progressing to plan, the firm noted.

Asos, whose name stands for As Seen On Screen, was founded more than two decades ago and has grown to become one of the UK's biggest online success stories.

In recent weeks a raft of big-name retailers have warned over the potential impact from supply chain constraints and lorry driver shortages, while inflationary pressures could lead to higher prices for consumers.

This week’s full-year results from Asos should provide greater insight into recent trading patterns and outline how the group’s international expansion is panning out. The annual figures for the 12 months to the end of August and trading update will follow third-quarter numbers that failed to excite the City.

Sophie Lund-Yates, equity analyst at financial services group Hargreaves Lansdown, said: “The market wasn’t impressed by Asos’ third-quarter results. Ongoing uncertainty and bad weather meant trading weakened in the final weeks of the period.

“We suspect, but can’t be certain, that things will have picked up in some key markets. More social events on calendars means more outfits to be bought.

“Asos previously said it expects ‘a measure of volatility’ to have continued – the extent of which we’ll find out [this week]. The big question will be to what extent supply chain issues, including freight capacity problems, have hampered Asos’ ability to meet recovering demand. Along that same vein, we’ll be looking at margins.”

She added: “The addition of names like Topshop have the potential to really help propel growth and we’d like to see strong customer numbers. With over £90 million of net cash at the last count we also can’t rule out the announcement of further acquisitions.”

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