Shares in Asos remained down by more than 8% this afternoon (19 March) as sales growth slowed at the UK-based online fashion retailer in the first half.
In its trading update for the three months to 28 February, Asos said although it continued to outperform in the UK with sales growth of 14%, and a 12% rise in Europe, its two largest markets – France and Germany – continue to be “challenging.”
Total group revenue reached GBP658.5m, a 13% increase on a reported basis from GBP581.4m last year. Retail sales were also up by 13% to GBP641.3m.
Its international arm was once again the biggest contributor, with a sales rise of 13% to GBP641.3m, while in the UK, sales totalled GBP244.4m. In the US, however, Asos said performance was behind its plans during the period, with the retailer booking a 4% sales rise to GBP76.6m.
CEO Nick Beighton said that as the company’s Atlanta warehouse went fully online, demand far exceeded its expectations. “Whilst very encouraging for the longer term, this caused a significant short-term despatch backlog which we have now cleared,” he added, noting US trading is now regaining momentum.
Retail gross margin was up by 40 basis points.
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By GlobalData“Our retail gross margin guidance for the year remains,” Beighton continued. “We will be increasing investment in price and marketing in the second half, particularly in France and Germany. Given the actions we are taking together with an improving US performance, we believe the group will deliver stronger growth in the second half. Consequently we remain confident that we will meet guidance for the full year.”
Sofie Willmott, senior retail analyst at GlobalData, notes Asos’ performance has not seen any improvement in the second quarter following a “shock” profit warning alongside its first-quarter results in early December – with full-year sales growth expectations slashed from 20-25% to 15%.
“December failed to bolster first-half growth and although its domestic market (which now accounts for 37.6% of group retail sales) continues to outperform the business overall, second-quarter growth slowed on the prior quarter (UK retail sales rose 18.8% in Q1),” she said. “We are not accustomed to seeing any negative figures within Asos’ results but the retailer reported a slight decline in average selling price and average basket value signalling that its ‘twenty-something’ customers are tightening their purse strings and seeking lower prices and/or discounted products.
“Despite this, order frequency increased 4% and active customers (defined as having shopped in the last 12 months) rose 16% – enviable statistics particularly for a mature online player.”
Willmott adds: “GlobalData estimated that the UK online clothing and footwear market grew by 10.4% in 2018 and is set to rise by 8.4% in 2019 so Asos remains a clear outperformer, stealing market share from its struggling competitors such as New Look and Topshop.
“Discounting remains rife in the UK fashion landscape but Asos must refrain from frequent promotions and hold firm at full price to demonstrate that its range offers value for money. By focusing on its Asos Design range, the retailer will benefit from higher margins while also building the collection’s identity as a standalone offer.”
Asos will announce interim results on 10 April.
