Despite booking what it calls a “disappointing” first-half performance, UK online fashion retailer Asos has posted a double-digit jump in revenues in the period – and continues to far outperform its competitors, according to one analyst.
Shares in the company were up by more than 6% this morning (10 April) after Asos reported a 14% rise in group revenues to GBP1.31bn (US$1.71) for the six months to 28 February. Retail sales climbed 13% to GBP1.28bn.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The group reported UK retail sales growth of 16% to GBP481.5m and international sales growth of 12% to GBP799.8m. Retail gross margin, however, slipped by 60 basis points to 47.4%.
Asos said total orders placed rose by 15% year-on-year to 34.4m, while first-half site visits exceeded 1bn for the first time.
Profit before tax in the period, however, tumbled 87% to GBP4m from GBP29.9m last year as the retailer incurred temporary transition costs of about GBP24m.
In its interim results statement, Asos said its performance across the period has been “disappointing” and noted the group is “capable of achieving more.”
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“Whilst delivered against a challenging market backdrop, our performance was undoubtedly impacted by the large scale transformational projects we have been undertaking and some of the choices we made on short term pricing, marketing and inventory to manage the business through this period,” it said. “These decisions, combined with disruption from the scale and pace of change, temporarily compromised our customer proposition, notably “newness”, the competitiveness of our product and our engagement with our customers. We have already taken corrective action to address these issues and are also taking a broader look at how to better serve our customers and strengthen the Asos proposition. We are confident of delivering a stronger performance in the second half.”
CEO Nick Beighton adds: “We grew sales by 14% despite a more competitive market. Asos is capable of a lot more. We have identified a number of things we can do better and are taking action accordingly. We are confident of an improved performance in the second half and are not changing our guidance for the year.”
Beighton said the retailer is nearing the end of a major capex programme. Whilst this has “inevitably involved significant disruption” and transition costs, the global capability it now provides gives Asos increased confidence in its ability to continue to capture market share whilst restoring profitability and accelerating free cash flow generation.
“Global online fashion is a growing, GBP220bn+ market. We now have the tech platform, the infrastructure, a constant conversation with our growing customer base who love our own great product and the constantly evolving edit of brands we present to them. We believe that ultimately there will only be a handful of companies with truly global scale in this market. We are determined that Asos will be one of them,” he adds.
Despite being distracted, Asos still far outperformed in H1
Sofie Willmott, senior retail analyst at GlobalData, notes that challenging market conditions coupled with ongoing major transformational projects to deliver, meant Asos took its eye off the ball in the first half. However, despite UK sales growth slowing on last year, the online pureplay has continued to far outperform its competitors.
“Asos delivered double-digit growth once again, enabling it to steal market share from players who are failing to excite shoppers such as New Look and the Arcadia brands,” she adds.
Willmott says the retailer’s ability to offer a plethora of brands on one destination site has bolstered growth in the first half, with third-party brand revenues up 18%. In comparison, its own brand range lagged behind – Asos Design sales rose just 5%, accounting for 36% of sales.
“Asos must ensure its own ranges are a focus so that it can benefit from higher margins and also emphasise its unique selling point, particularly when competitors such as Amazon and Next are ramping up their branded clothing offer,” she adds.
“The online fashion leader still expects to achieve full year growth of about 15% as outlined in December, meaning it has much to do in the second half. Although Europe remains a concern for the retailer, which must be quickly addressed given that it accounts for almost one third of sales, there are additional growth opportunities in the US now that the Atlanta warehouse has opened, despite difficulties in meeting demand initially.”
