Asos has very merry Christmas as global sales surge continues
Asos concluded what was a good year for the pureplay online retailer with a four-month end-of-year period that showed just how strong a business it is. On Wednesday, its trading statement for the four months ended December 31 (which it refers to as P1) showed fast revenue growth that beat its own expectations.
It said this was driven by its investment in product, pricing and marketing and that it saw stronger consumer demand for its products. “Our multi-brand model and strong execution enabled us to capture available demand as consumers increasingly shopped online,” it explained.
The performance in P1 also benefited from a return to the lower returns rates that it had seen during the lockdown earlier in the year. And with restrictions likely to be in place for the balance of the first half (even after the current full lockdowns end in many countries) it expects a net pre-tax profit benefit linked to the Covid crisis of at least £40 million for the half.
It also expects full-year pre-tax profit to “be at the top end of current market expectation”.
So, what actually happened on the sales front in the autumn and festive period? Total group revenue surged 24% currency-neutral or 23% on a reported basis to £1.364 billion. Retail sales jumped by the same percentages to reach £1.325 billion.
That divided down into a 36% increase in UK retail sales to £554.1 million and an 18% increase in EU retail sales (currency-neutral and reported) to £390.7 million. US retail sales rose 17% currency-neutral and 13% reported to £156.8 million. And retail sales in the rest of the world were up 20% currency-neutral and 15% reported, reaching £224.2 million, “supported by good growth in Australia and the MENA region”. In total, international sales easily outweighed those in the UK at £771.7 million and were up 18% currency-neutral and 16% reported.
The company is clearly on a roll and said that its active customer base increased by 1.1 million people to 24.5 million during the period. Importantly, its good growth in new customers offset the impact of existing customers who had fewer reasons to shop for officewear, partywear and other occasion-led categories.
It wasn't 100% good news though as the gross margin was down 90bps, reflecting the “continued 'lockdown' category product mix, investment into customer acquisition and increased freight costs due to Covid disruption”.
As mentioned, the company is upbeat about its prospects for 2021, even though it expects Brexit tariff costs of around £15 million associated with country of origin rules.
It will continue to invest in expanding the business and said the automation of the US fulfilment centre is to begin this year, while a lease has been signed on a fourth UK fulfilment centre (in Lichfield). Capex should rise by £20 million to around £190 million, reflecting that investment in US automation.
CEO Nick Beighton said he was “really pleased with the strong performance we have delivered, which is testament to both the strength of our multi-brand model and the hard work of our people. We have continued to execute well and deliver for our customers, whilst investing into growing our business and driving further efficiency through a strong operational grip.
“Looking forward, given the uncertainty associated with the virus and the impact on customers' lives, our cautious outlook for the second half of the year remains unchanged. However, the strength of our performance gives us confidence in our continued progress towards capturing the global opportunity ahead.”
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