Asos enjoys ongoing sales surge, US, EU retail see power growth
Sales statements from Asos are always closely watched but in the current tough retail environment they’re more under the microscope than ever. So did the company's trading update for the four months to the end of June give us some clues as to just how much of an appetite consumers have for fashion at the moment?
It certainly did. Shoppers are still buying and spending more than ever, especially in its growth markets outside of the UK. But they seem to be very price conscious and are prioritising value.
If you don’t like figures, look away now. But it’s worth staying tuned as the numbers show just how well the company is doing.
Asos said that its total retail sales rose 32% to £660.1 million, although given the weak pound, they got a currency exchange boost. On a currency-neutral basis, they still rose strongly with a 26% uplift. UK retail sales rose 16% to £234.6 million, a good result in a market characterised by consumer caution and a focus on necessities rather than discretionary spending.
Its second-largest market, the EU, rose 41% to £196.6 million, or 30% currency-neutral. Retail sales in the US - often cited as a difficult market by so many higher-end brands - rose 38% to £94.4 million, or 26% currency-neutral. And the rest of the world was a stunning 54% ahead at £134.5 million, or 41% currency-neutral. International sales overall soared 44% in the period.
The company said it enjoyed continued strong customer engagement with active customers up 25%, the average basket value up 3%, average order frequency rising 6%, and conversion up by 10bps. The total number of orders shipped rose 28% to almost 17 million.
Last month its websites attracted 146 million visits and it had 15 million active customers, of which 5.2 million were located in the UK and 9.8 million abroad.
Yet even Asos is seeing signs of a slight slowdown. At the same time as it released four-month figures it also gave a 10-month update and while UK sales have risen 16% in the most recent period, they rose 17% for the 10 months to June 30. Similarly, the EU sales rise for the 10 months was 4% higher on currency-neutral basis than the four months, the US was 7% higher and the rest of the world 6% higher.
The retail gross margin was flat year-on-year, suggesting the company is holding prices in order win business. And CEO Nick Beighton also referred to this in his update statement saying: "Strong H1 sales momentum has continued through the third period supported by our ongoing investment in our customer proposition and in price.”
But while the last four months may have been slower than the previous six, there’s no denying that Asos is more than holding its own. Even in the most challenging environment, the pureplay e-tailer is driving a level of sales growth that many physical store chains would certainly envy.
It’s being helped not just by product but by what’s been going on in the background with continuous tech upgrades in the period and the Phase 1 transition to its Eurohub 2 warehouse now operational with phase 2 under way. Its logistics plans will not only boost its European sales but also its US business.
Beighton added: “This good performance has been underpinned by advances across all areas of our business including retail, technology, warehousing, delivery solutions and customer care. We have made a smooth transition to our new Eurohub 2 facility in Germany and anticipate confirming a new US logistics hub soon.”
What does it all mean for profits? Good news, of course. Current financial year reported sales growth is anticipated to be at the upper end of the 30%-35% range with pre-tax profits to be “in line with market consensus”.
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