Asos CEO Nick Beighton has said Asos is “well placed” to survive the coronavirus crisis after a robust first half of the year.
Pre-tax profit rocketed 653% to £30.1m for the six months to 29 February 2020 compared with the first half of 2018/19. Revenue rose 21% to £1.6bn, while UK retail sales jumped 20% to £577.1m.
However, sales across the group dropped 20%-25% in the most recent three weeks of trading year on year, amid the coronavirus pandemic.
Beighton said: “We’ve had a robust first half, along with good progress against the priorities we set out. Clearly Covid-19 has had a significant impact on our business and current trading. But we’re taking swift and decisive actions. We are well placed to cope with this and exit this chapter in a stronger position for growth.
“Given that it’s very difficult to predict how long the current pandemic will go on for, and what the state of the economics will be on the other side, we want Asos to emerge in a much stronger position – a position for growth. And we’ve taken action accordingly to improve our financing.”
Asos said it has reduced discretionary costs and capital expenditure to mitigate the impact of the pandemic. It is also making use of the government furlough scheme, although it did not say how many staff are affected, and has cancelled some orders with suppliers.
Beighton clarified that orders that were in transit to the retailer would still be paid for: “We have cancelled some orders, but we’ve continued to pay all our suppliers within the existing terms. We phoned all suppliers and had a discussion on the phone – we did not send a blanket email – and have honoured all commitments that were already on the way to us [in transit].”
He added that Asos had been closely monitoring consumer habits in Italy, the nation with the highest coronavirus death toll, and the rest of the world: “What we have seen is initial shock as consumers seem to adjust to the reality of lockdown. First, we see sales and [website] visits decline, and then we see an increase in traffic – not conversion – over the next three to four weeks.
“We’ve seen this working in the same pattern across the rest of Europe. Other markets are at a different point on that curve.
“As you would expect, given the government measures around the world, we have seen some quite material swings in product categories. We’ve seen high sales pick-up of leisurewear, jerseywear, beauty and health products – and activewear and sneaker brands, too.
“Not surprisingly categories we see as going-out gear – dresses and men’s tailoring – have fallen back quite dramatically.”
Sofie Willmott, lead retail analyst at GlobalData, described Asos’s interim results as “impressive”, but cautioned that there are still many challenges ahead: “Asos’s carefully planned strategy for the peak trading period of 2019 clearly worked, with the online pureplay reporting impressive figures up against a troublesome 2018.
“However, it will not be able to build on this momentum to drive similar growth for the full year, and the second half is set to be significantly disrupted by Covid-19.
“Although we forecast UK clothing and footwear sales will decline 23.5% in 2020, the online channel will fare better and expenditure is expected to fall 10.8%, giving online retailers the opportunity to steal market share – particularly from Primark, TK Maxx and Next.
“While it will be a challenge for Asos to manage newness coming through without its usual photography and styling operations functioning as normal, and with demand much lower, it benefits from having an open sales channel, alleviating it from some of the excess inventory issues that other players will face when their stores and websites reopen.”