Online fashion firm Asos cashes in on pandemic restrictions as profits rocket

Online fashion giant Asos has revealed soaring sales and profits during lockdown as most high street stores remained closed.

Revenues at the retail business jumped 24 per cent to £1.98 billion in the six months to the end of February, with pre-tax profits leaping 253 per cent to £106.4 million.

The business 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.

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In the UK, Asos sales were up 39 per cent to £800.4m, compared with an 18 per cent rise in the EU, 16 per cent in the US and 16 per cent in the rest of the world.

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

The firm, whose name stands for As Seen On Screen, told investors: “Overall we saw a net Covid-19 tailwind of £48.5m – a benefit which we expect to reverse once we see restrictions lifted on the hospitality and tourism sectors.”

The integration of the Topshop brands, which Asos bought out of administration earlier this year, is also progressing to plan, the firm noted.

And it has remained flexible in responding to demands for “lockdown” products, as sales of formal and outfits for social events remained low. Instead, shoppers turned to “activewear” and “casualwear” categories.

Arlene Ewing, investment manager at wealth management firm Brewin Dolphin, said: “Asos has delivered a record set of results and beaten analyst expectations on profits – a significant achievement over the six months to the end of February

“The business is in great shape, with cash on its balance sheet and the acquisition and integration of brands such as Topshop yet to be fully reflected in performance.

“Owning these product ranges will give Asos greater control over margins and, although they will still require some investment and revival, they could make a meaningful contribution to sales in time.”

Asos, which was founded more than two decades ago, saw it profit margins fall during the period – by 200 basis points, or 2 per cent – due to increased freight and duty costs, alongside foreign exchange rate movements going against the company.

Bosses said they hope to be in a strong position, ready to capitalise on “event-led” products, when social restrictions ease.

Richard Hunter, head of markets at Interactive Investor, noted: “There may be challenges to come, but for the moment Asos is firing on all cylinders as pandemic lockdowns largely play to its strengths.

“The company has managed to retain its young and trendy following and, following a partial return to the workplace and the renewed ability to socialise, Asos could well benefit from many a refreshed wardrobe.

“The addition of the Topshop brands is seen as both complementary to its existing offerings as well as providing another route to its youthful audience, and the initial signs of the integration are promising.

“Prospects for the company are clearly on the boil as far as investors are concerned, where despite the strength of the share price the market consensus remains at a buy,” he added.

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