Asos has another stellar year, takes starring role in lockdown
The Asos final results report on Wednesday was another confirmation of just how important pureplay e-tailers have been during the unusual circumstances of 2020. As store-based rivals struggled, it managed to increase both sales and profits in the 12 months to August 31 (FY20).
It saw “strong operational and financial performance” and said it’s "well positioned to progress as one of the few truly global leaders in fashion retail”.
The firm’s active customer base rose by 3.1 million people during the year to 23.4 million and it’s made a “solid start” to FY21, but it’s still cautious on the outlook for consumer demand while “economic prospects and lifestyles of 20-somethings remain disrupted”.
So what happened in its latest year? In numbers, group revenues rose 19% (both reported and currency-neutral) to £3.263 billion. Retail sales were up by the same percentage to £3.171 billion, and UK retail sales managed an 18% rise to £1.176 billion. International retail sales rose 20% in total to £1.995 billion. Within that, EU sales rose 22% and France performed particularly well during lockdown with “lower relative online penetration generating further opportunity for customer acquisition during the year”. Both the US and the Rest of the World rose 18%.
That all added up to a 16% gross profit rise to £1.547 billion, although the retail gross margin understandably dipped in the unprecedented period to 45.9% from 47.4%. But pre-tax profit jumped by £109 million to £142.1 million.
CEO Nick Beighton said the record first half saw Asos making progress in “addressing the performance issues of the previous financial year”. But H2 was clearly a challenge and even though its business strengthened, it came in for criticism from some over its determination to continue during lockdown.
Yet Beighton added that the company has emerged from the pandemic as “a stronger, more resilient and agile business whilst delivering strong profit and cash generation”.
That’s all pretty impressive given the problems that the pandemic presented, whether through supplier countries like China locking down early this calendar year, or giant markets like the UK, Europe and US seeing normal life disrupted slightly later until well into the summer.
But Beighton said Asos “showed great agility, adapting to significant operational change, disruption across our supply chain, a dramatic shift in consumer demand and an uncertain and fast changing landscape”.
He added that demand for certain types of product, particularly occasion and formalwear, “remained constrained, [but] we saw strong growth in casualwear and other lockdown-relevant products.”
He thinks consumer headwinds will continue and “will not abate until lifestyles and financial stability normalise for our 20-something customer and we expect the disruption to global product supply will be felt into 2021”.
However, the company has built greater diversity into its product mix with all that in mind. And after raising new funds, it has the cash to navigate the uncertain environment and continue its investment plans for FY21. These include starting investment in its fourth fulfilment centre.
Interestingly too, on the product front, the company said that while the ‘going out’ product that has always been key to its customers is seeing lower demand at present, it won’t “lose focus on our core 20-something fashion audience and the 'going out' product customers love Asos for”. It has “maintained resource levels in this area”, although it has adapted its product mix to match lifestyle shifts, increasing its mix of casualwear, activewear and Face + Body.
Both of these two latter categories have seen “extremely strong customer demand through lockdown and we have capitalised on the opportunity to accelerate our ambitions in these categories”. Sportswear rose 50% during lockdown.
And it said its 13 own brands did well in the past year, delivering sales of £1 billion+. Collusion and Asos 4505 both “resonated with customers through lockdown”. Asos 4505 grew 89%, while Collusion grew 44% “and firmly established itself as a top 10 brand” on the site.
It also said Asos Luxe and Dark Future were launched “as we developed further choice for our 'glam girl' and 'alpha male' customer segments”. Both brands “had good success with initial launch ranges, but we have taken the opportunity over the summer to further develop customer engagement, increasing choice in the range and backing the brands with influencer-led campaigns”.
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