Asos group sales dropped 20%-25% amid the coronavirus pandemic, after it achieved record interim profits.
Profit before tax at Asos surged 653% to a record £30.1m for the six months to 29 February 2020, while revenue increased by 21% to £1.6bn. Asos said the results reflected “strong” trading and good progress reducing non-strategic costs.
UK retail sales jumped 20% to £577.1m, while international retail sales rose 22% to £974.3m.
However, the outbreak of Covid-19 has had a “significant” impact since the end of the first half, the company said, and demand was “significantly” dented since containment measures were introduced at the end of March. Group sales have fallen between 20% and 25% in the most recent three weeks of trading.
To help mitigate the impact of the pandemic, discretionary costs and capex have been reduced, and the company said it was making “appropriate” use of government support, including payment deferrals and job retention schemes where available.
Having stress-tested a range of scenarios, Asos said it had sufficient liquidity under its existing £350m revolving credit facility (RCF).
Nevertheless, it announced additional financing “to further protect” the business and position it for long-term growth. Asos said it is finalising discussions to secure a £60m to £80m 12-month extension to its RCF with covenant adjustments to ensure additional operational flexibility through the crisis. It also announced a proposed placing of up to 18.8% of its issued share capital “to protect against a prolonged downturn”.
Meanwhile, the etailer has also announced that it has appointed Patrik Silén, former partner at management consultancy McKinsey & Company, as chief strategy officer. He will join Asos on 5 May, reporting to CEO Nick Beighton.
Fellow executive Asos members are Mat Dunn, chief financial officer; Mark Holland, chief operating officer; Cliff Cohen, chief information officer; Robert Birge, chief growth officer; and Jo Butler, chief people officer. The company is currently recruiting the final new role, that of chief commercial officer.
“Asos had a strong start to the year, making significant progress against the priorities we set out and delivering a better than anticipated first-half performance, driven by the operational improvements we are making to the business”, Beighton said.
“Along with other businesses, we have been significantly impacted by the Covid-19 outbreak. Our first priority was to quickly put in place the necessary measures to ensure the health and well-being of our people. I have been extremely impressed with the pace of change and the flexibility our teams have shown in adopting these new ways of working. I’d like to thank them all for the way they have responded.”
He added: “Since then, we have been focused on keeping our business delivering for customers whilst implementing a series of actions to mitigate the sales impact we have been experiencing. At the same time we have been working to strengthen our financial position, including reaching agreement with our lenders to provide us with additional short-term financial flexibility.
“The Asos business model provides us with significant resilience and we are encouraged to have seen, across our markets, that where consumers are in lockdown, Asos continues to be an important part of their lives. We have a global platform with the capacity and capability to drive our future growth as demand returns and against that backdrop we are looking to raise incremental equity capital to ensure we have sufficient resources to capitalise on the future whatever it may hold.”