Sales growth at Asos hits the buffers despite surge overseas

Online fashion retailer Asos came under pressure yesterday as it revealed that UK sales growth had almost ground to a halt in the last three months.

Rapid expansion overseas enabled the firm to post revenue growth of 49 per cent overall, but analysts said the UK performance raised questions over growth prospects.

Asos, which targets internet-savvy 16 to 34-year-olds looking to emulate the designer looks of celebrities such as Kate Moss, Sienna Miller and Alexa Chung, said UK retail sales growth slumped to 1 per cent in the second quarter of its financial year from 15 per cent in the previous three months to June.

The UK, which accounts for 40 per cent of the group’s business, generated revenues of just over £44 million in the latest three-month period, while domestic sales for the half year rose by 8 per cent to £88.7m. However, the latter figure was driven by a 15 per cent first-quarter improvement.

Retailers are struggling as rising prices, muted wages growth and government austerity measures force many shoppers to rein in spending on non-essential items.

Until recently, Asos had been bucking the trend, benefiting from a young core customer base and a shift from spending on the high street to buying online. Shares in Asos reached a 12-month high of 2,508p in June, fuelled by buoyant trading and bid speculation, but have since fallen back.

Pointing to increased promotional and marketing activity, chief executive Nick Robertson said the firm had been “pulling levers that we didn’t think would have to be pulled”.

“It’s not a complete train crash,” he insisted, forecasting full-year retail sales growth in the UK would be “somewhere between flat and [a] low single-digit [percentage rise].”

Robertson said: “We’ve just got to keep internationalising and internationalising quickly because that’s where we’re going to find the growth.”

The results showed that group revenues overall in the second quarter rose to almost £110m from £73.9m and margins also increased as Asos did not have a summer sale this year.

Total international revenues leapt 141 per cent, with websites launched in Australia, Italy and Spain to take the number of sites to seven.

Shares in the group dipped 1.7 per cent to close at 1,480p as analysts fretted that rapid growth in Britain had gone for good.

In a note, Espirito Santo analysts said: “We see this as a function of the consumer environment, increasing competition and a degree of normalisation in internet growth rates. In addition, the weather will not have been helpful.”

Sheridan Admans, investment adviser at the Share Centre, said: “It shouldn’t have been a surprise that UK growth was below broker expectations given the economic pressures.

“Looking ahead we are very confident in the company’s ability to grow its revenue and profits, as well as establishing itself in the regions in which it operates.

“However, in the short to medium term, slowing economic growth, the problems facing Europe and the inability of Western nations to get the unemployed back to work are likely to be a significant headwind to Asos’s growth.”

Asos reported a 56 per cent rise in overall first-half group revenues to £217.3m.