"This has been another year of substantial progress for Asos,” said CEO Nick Beighton

"This has been another year of substantial progress for Asos,” said CEO Nick Beighton

Shares in Asos surged by more than 14% this morning (17 October) as the UK-based online fashion retailer posted a GBP500m rise in revenue and a 28% pre-tax profit hike for 2018. 

For the year to the end of August, earnings jumped 28.5% to GBP82.4m (US$108.3m) from GBP64.1m a year earlier, while pre-tax profit climbed 28% to GBP102m from GBP80m in the year-ago period. Gross margin expanded 140 basis points to 51.2% from 49.8%.

Group sales reached GBP2.4bn, a 26% increase from GBP1.9bn last year, while retail sales also increased by 26% to GBP2.4bn on a reported basis. This is Asos' third consecutive year of sales growth in excess of 20%, with revenues having more than doubled over the same period.

Its international arm was the biggest contributor, with a sales rise of 27% to GBP1.5bn, accounting for 63% of total retail sales.

Meanwhile, Asos hailed an "outstanding year" for its UK retail division which delivered full-year sales growth of 23% to GBP861.3m, accelerating as the year progressed, despite a challenging market, aided by an increase in order frequency from the existing customer base.

"This has been another year of substantial progress for Asos," said CEO Nick Beighton. "We delivered 26% sales growth and 28% profit growth whilst investing heavily in the long-term potential of the business. Our reported profit increase was achieved despite bearing material transition costs due to our investment programme. All our financial and customer key metrics have shown positive growth."

Beighton added the retailer's guidance remains unchanged both for the current year and the medium term, despite its "record" levels of investment.

"Asos is moving fast and is as differentiated as ever. The potential for our business is huge and we remain focused on building Asos into the world's number one destination for fashion-loving twentysomethings," he said.

No sign of UK slowdown 

Sofie Willmott, senior retail analyst at GlobalData, notes despite having launched years before many of its youth fashion competitors like Boohoo and PrettyLittleThing, Asos continues to deliver robust UK sales growth, far outpacing that of the online market.

"Unlike some of its competitors that have been blaming the prolonged warm weather for a disappointing performance over the summer, Asos' sales accelerated in the last two months of FY2017/18 demonstrating the appeal of its proposition and the loyalty that Asos Premier drives," she adds. "All round impressive metrics have led Asos' share price to rise 14% this morning."

The retailer has made significant investments during the year including opening its new US warehouse in Atlanta, further developing its European delivery hub and releasing 2,900 tech updates versus 1,300 last year. By evolving its infrastructure, Willmott says Asos is creating a solid base for future growth that will enable it to cope with higher international sales as it becomes a bigger player globally, as well as increased domestic orders as it takes a greater slice of UK retail spend.

"Layering on top of its evolving operational framework, Asos constantly improves its product offer demonstrating that it is clearly in tune with its young customers – a key factor aiding its continual high growth," she says.

The retailer has recently launched its Collusion collection aimed at the younger end of its target shopper base, which includes gender-fluid clothing, items made from 100% sustainable cotton and vegan leather.

"Alongside this, Asos has committed to training its design teams on circular design best practice to improve the sustainability of its products. By quickly reacting to shifting shopper priorities, Asos is ahead of the curve and will be better protected as shopping sustainably becomes more important to UK consumers.''

Richard Stables, CEO of e-commerce advertising and shopping comparison service Kelkoo, adds the continued growth of Asos demonstrates that twentysomethings simply don't have the same shopping habits as their parents - convenience and varied pricing are now far more important than the in-store shopping experience.

"Traditional retailers need to adapt by ensuring that they expand their online offering and don't follow in the footsteps of House of Fraser," he says.

"John Lewis is a much-loved British brand and has launched a premium personal shopping and champagne service to enhance customer experience, but this is no longer enough to remain competitive in today's retail landscape with the rise of major online players and direct-to-consumer marketing.

"ONS figures indicate that wage growth has picked up but this income will not be spent on the high street; instead, e-commerce retailers will increasingly attract consumer spending."