ASOS records pre-tax profit increase of 329% to £142.1m

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Online fashion retailer ASOS has today reported that it has added more than three million new customers in the past year, with annual profits soaring thanks to the rapid rise in digital sales for the retail sector.

ASOS revealed that it now has exceeded 23.4 million customers, with more than seven million in the UK.

Worldwide sales were up 19%, and pre-tax profits rose by 329% to £142.1m.

Nick Beighton, ASOS’ CEO, commented: “After a record first half which saw us make progress in addressing the performance issues of the previous financial year, the second half will always be defined by our response to Covid-19. I am proud of the way ASOS met this challenge head on, putting our duty to act as a responsible business at the heart of our approach and working to balance our performance in that context. As well as protecting staff, suppliers and customers, we’ve driven efficiency and have emerged a stronger, more resilient and agile business whilst delivering strong profit and cash generation.

“I am pleased by the improvements we have made this year but there is still more for us to do to continue our progress. Whilst life for our 20-something customers is unlikely to return to normal for quite some time, ASOS will continue to engage, respond and adapt as one of the few truly global leaders in online fashion retail.”

Industry reaction

Zach Thomann, Executive Vice President & General Manager at PFS, comments: “ASOS’ three million new customers and soaring profits are an illustration of just how significantly shopping habits have been altered by the pandemic. PFS’ research found that during the first lockdown, over half (53%) of shoppers said they made more online purchases. Interestingly, as many as 77% of the shoppers said they plan to continue purchasing more online once the pandemic is over, signalling a permanent change in their behaviour. But it’s not all plain sailing for online retailers.

“Further PFS research has also found that a new ‘conscious consumer’, more aware of the environmental impact of their purchases, has emerged from the pandemic. Over a third (37%) of shoppers say they are now more conscious of the environmental impact their online shopping habits have, while nearly three-quarters of consumers expect online retailers and brands to use recyclable packaging (73%) or minimise their use of packaging (74%). For struggling brick-and-mortar retailers, looking at innovative ways to add value such as BOPIS (buy online pick up in store), can keep customers coming in store, merge the online and offline experience, and better enable social distancing.”

Stay at home sales and fewer returns, keeps ASOS ahead of the fashion pack

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

ASOS has unboxed an impressive set of numbers as ‘staying-in’ fashion proved a big hit with locked-down shoppers. It posted profit before tax of £142.1 million, an increase of £109 million on the previous year as sales soared across the group. They rose 18% in the UK, 22% in the EU and 18% in its growing US market, which will be key for its continued expansion. These are pretty superstar results for a company which started out as a niche, online clothing retailer pegged to celebrity styles and underline how it’s become one of the fast fashion industry’s top performers.

ASOS, originally shorthand for ‘As Seen On Screen’, appears to have been perfectly placed to capitalise on the accelerated shift to shopping. Styles showcased in its vast online shop were in demand as high streets were forced to shut down. Last year the company made heavy investment into IT and spent significant amounts sorting out operational problems at its warehouses, which ate into profits. But that spending meant the company was in a much better position to profit from the lockdown shopping surge. Despite the challenge of maintaining social distancing at warehouses, it has managed to fulfil the orders of more than 3 million new shoppers with active customers increasing to 23.4 million this year.

Crucially, as more customers turned their bedrooms into fitting rooms, they sent fewer purchases back, the fall in returns has helped increase margins. The huge profit rise and the capital raising undertaken in April meant ASOS closed the year with a strong net cash pot of £407.5 million, up from a net debt position of £90.5 million at the start of the year.

The question though is whether these trends will continue in the coming months, as a depressed economic outlook may push down demand to refresh wardrobes. With venues forced to close at 10am and the Christmas party season cancelled, profits from party wear will be thin. Job prospects are uncertain for its core group of customers in their 20s and so the company will have to be very choosy about the ranges and prices it offers to maintain demand and stop returns being a major headache once again. Developing its leisure, fitness and beauty lines further is likely to be a good strategy as these are ranges which tend to be sent back less frequently.

ASOS is also trying to jostle for a higher position on the sustainability billboard as a way to gain market share. That is a huge challenge for a fast fashion retailer but the company has previously said its committed to using more recycled fabrics and aims to sell 100% more sustainable cotton by 2025. With its online rival Boohoo, trying to shake off a supply chain scandal, a focus on higher ethical standards might help it target the shoppers, that it’s so far failed to reach.

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