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Asos profits fall 10% as it adjusts international pricing

Asos.com’s pre-tax profits dropped 10% to £18m in the six months to February 28, as it invested in making its prices more competitive in international markets.

Retail sales grew 14% to £536.4m, driven by a 27% rise in the UK. International sales were up 5%.

Retail gross margin was down 270 basis points to 46.8%. However, Asos said its full-year profit and margin forecast is in line with expectations, as it has seen “encouraging momentum” in international markets.

The company launched a zonal pricing project in October, allowing it to price brands differently in line with local markets.

It has been rolled out to 50 brands sold across Australia, the US, France, Germany, Italy and Spain, and Asos said initial results were encouraging. It plans to add further brands over the next six months.

The final £6.3m insurance payout it received following a fire at its Barnsley warehouse in June 2014 was reinvested in this international pricing proposition.

The company has also reduced local currency prices for Australian, New Zealand and eurozone customers.

Asos said it would continue working on its product and pricing before expanding into new markets, but expects to launch new European websites within the next year.

Chief executive Nick Robertson said: “Our customer engagement remains high, with growth in visits, average order frequency, average basket size and conversion all improving. Our active customers grew by 13%, exceeding the 9 million mark for the first time.

“The successful launch of our zonal pricing capability and planned investment in our international prices resulted in a gross margin decrease of 230 basis during the period, which together with increased investment in building our global distribution capacity, has reduced half-year profit before tax by 10% to £18m.

“With our continued investment in our international price competitiveness gaining traction, momentum in the business is building. This gives us confidence in the outlook for the second half and that full-year profit and margin will be in line with expectations.”

Asos said its search for a new group chief financial officer is at an “advanced stage” and it will update the market in due course.

@KirstyMcGregor

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