Asos optimistic on outlook as Q3 sales grow 10%

Online fast fashion retailer Asos has said it expects full-year earnings to come in at the top end of market expectations after sales rose 10% in the third quarter thanks to an improvement in demand.

Asos has seen sales growth improve materially since containment measures were introduced by governments in March in response to the Covid-19 pandemic.

In the four months ended 30 June, total group revenue, which includes retail sales, delivery receipts and third-party revenues reached GBP1.01bn (US$1.27bn), while retail sales alone were also up 10%, to GBP983.3m.

Sales were boosted by new customer acquisitions, strong growth in ‘lockdown’ product categories such as casualwear and activewear, increasing warehouse capacity, and an overall improvement in demand.

The fashion group said its active customer base increased to 23m, up 16% year-on-year, with particularly strong growth in new international customers.

In the UK, sales fell 1% in the quarter to GBP329.2m, but this was offset by a 22% increase in EU sales to GBP328m and a 19% increase in sales in the Rest of the World to GBP201.2m. In the US sales were up 3% to GBP124.9m.

“This has been a tough time for all businesses, but we have remained focused on doing the right thing for our people and our customers and making sure that we emerge from the current crisis as a stronger and better organisation,” said CEO Nick Beighton.

“Our performance in Q3 shows that we are delivering against this aim despite the tough economic and social backdrop. We have learnt a lot and adapted quickly, and Asos finishes the period with improved underlying profitability. While we remain cautious about the consumer impact of Covid-19 looking forward, we are on track to deliver strong year-on-year profit growth and to return to positive free cash flow for the full-year.”

In the short to medium term, Asos said it remains “cautious” on demand given the continued social distancing, ongoing restrictions of events and the uncertain economic outlook for its 20-something customers.

Profit before tax is expected to be towards the top end of market expectations for the 2020 year, boosted by “rigorous” performance management, continued removal of non-strategic costs, and a beneficial returns profile.

Within its warehouses, Asos said progress continues to build further capacity, in line with social distancing protocols, to ensure the company is able to service peak demand.

Click here for analyst reaction to the figures.