By Karen Peattie
SALES at online fashion group Asos soared in the last quarter although shares dipped by about 9 per cent yesterday morning as the retailer warned that less favourable weather conditions in June, coupled with short-term trading volatility around the impact of Covid-19 on its supply chains and freight costs, dampened demand.
Asos, which stands for As Seen on Screen and which targets an audience of “fashion-loving twentysomethings around the world”, revealed a 27 per cent rise in group revenues to £1.29 billion during the four months to June 30, up from £1.1bn in the same period last year.
The UK remained the retailer’s biggest market, generating underlying sales of more than £526 million over the last quarter, up 60% on the same period last year.
EU sales were up 15% from last year, at £388m, with Germany performing particularly well.
However, the company warned that trading in the past three weeks had suffered after the UK Government delayed the much-anticipated lifting of Covid restrictions on June 21, leading to young people putting off buying “occasionwear” dresses and a wet June also affecting Asos’ core market.
In a trading update, the company stated: “Trading in the last three weeks of the period was more muted, as continued Covid uncertainty and inclement weather, particularly in the UK, impacted market demand.
“We anticipate a measure of volatility to continue in the near term, given the rapidly evolving Covid situation worldwide.”
Nick Beighton, the chief executive of Asos, pointed to “another strong performance against a backdrop of continued social restrictions and global supply chain pressures”.
But he noted: “Although mindful of the continued impacts of the pandemic on our customers in the short term, we believe that the structure of the global ecommerce fashion market has changed forever, which will drive an increase in online fashion sales over the long term.
“We’re excited about the size of the prize ahead of us and the opportunity of delivering on our ambition of being the number one destination for fashion-loving twentysomethings.”
Founded by Nick Robertson in 2000, Asos pointed to the positivity in US growth rates reflecting an improved stock offer, increased demand for going out and occasionwear clothing, the impact of stimulus cheques, and the removal of many coronavirus restrictions.
John Moore, senior investment manager at Brewin Dolphin, suggested that issues around certainty of supply and demand in a changing Covid-19 outlook are “likely to make the next couple of quarters a little unpredictable for investors”.
However, he pointed to the retailer’s deal to sell Topshop and selected Asos ranges in Nordstrom shops in the US as offering “flexibility and increased sales reach”.
Mr Moore noted: “Developing extra sales through those brands in the US or, indeed, closer to home could help Asos outperform rivals.
“The short-term uncertainty may unsettle some, but with a strong balance sheet and increased geographical diversification, Asos is in a good position as its target market eagerly awaits the next stage of lockdown measures easing.”
At Hargreaves Lansdown, senior equity analyst Sophie Lund-Yates said that core customers holding off buying party dresses and socialising with friends was to be expected amid “doubt about when so-called freedom day is going to happen”.
Ms Lund-Yates commented: “Bad weather and ongoing uncertainty mean Asos’ UK sales trends weakened towards the end of June.
“This is to be expected – if there’s any doubt about when so-called freedom day is going to happen, its young, core customers will hold off on buying party dresses. Heavy rain means less socialising too.”
But she noted: “With restrictions set to ease in the coming days, we could see increased demand as people gear up to hit bars and clubs once more.
“There is a lot resting on sales regaining some of the lost ground, with the market clearly disappointed in the uncertainty pointed out in Asos’ trading statement.”
Ms Lund-Yates said that the next quarter will be crucial as it will give a better indication of the sales pace Asos can achieve in more normal times.
Noting that return rates were climbing back to pre-pandemic levels, she warned: “That’s not the best news although it’s not unexpected. It will likely mean some dents to operating margins in the near term.”
Shares in Asos, which is listed on London’s junior Aim market, closed at 3,854.00, down 18%.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here