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Asos profits slump after 'disappointing' first half

Group revenues at Asos were up 14% to £1.3bn for the six months 28 February, but its pre-tax profit fell 29.9% to £4m following heavy investment in technology platforms and logistics. 

Total retail sales at the etailer jumped 13% to £1.2bn on a like-for-like basis, and UK retail sales were up 16% to £481.5m. International sales also grew by 12% to £799.8m. 

Gross profit was up by 12% to £639.9m. However Asos reported a net debt of £37.9m – down from net cash of £37.7m during the same period last year. 

Retail gross margin fell by 60 basis points to 47.4%, caused by “a high level of discounting and promotional activity across the market in the first quarter”.

Asos said the ”disappointing” figures were reflective of a period of heavy investment, and it reported a capital expenditure of £103.2m. It said it had improved efficiency in its Euro Hub distribution centre in Berlin and made significant investment in technology. 

A total of 34.4 million orders were placed during the period, up 15% year on year. Active customer numbers grew by 16%, however, average basket value fell by 2%. 

Collusion Campaign shot by Tom Sloan

Collusion Campaign shot by Tom Sloan

Collusion, Asos’s new inclusive and gender-fluid brand launched in September. It was the most successful brand launch ever, said Asos, selling 1.5 million units in the period.

Menswear, however, underperformed across tailoring, accessories and footwear, and womenswear sales declined in the “Going Out” offering. 

As part of its ongoing brand review, Asos dropped more than 280 brands in the period and added 190 new lables. The etailer is focusing on securing smaller, up-and-coming brands to sit alongside more established names such as & Other Stories, which will launch on the site for the spring season. 

CEO Nick Beighton said: “We grew sales by 14% despite a more competitive market. Asos is capable of a lot more. We have identified several things we can do better and are taking action accordingly. We are confident of an improved performance in the second half and are not changing our guidance for the year.

“We are nearing the end of a major capex [capital expenditure] programme. While this has inevitably involved significant disruption and transition costs, the global capability it now provides us gives us increased confidence in our ability to continue to capture market share while restoring profitability and accelerating free cashflow generation.

“Global online fashion is a growing, £220bn-plus market. We now have the tech platform, the infrastructure, a constant conversation with our growing customer base, who love our own great product and the constantly evolving edit of brands we present to them. We believe that ultimately there will only be a handful of companies with truly global scale in this market. We are determined that Asos will be one of them.”

The outlook for the second half of the year remains unchanged. 

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Readers' comments (1)

  • I haven’t looked at the accounts yet, but the premise of the article looks misleading to me. Surely investments that are likely to pave the way for Asos’s future membership of an elite global club are long-term investments more likely to have been capitalised — thus being balance sheet items rather than P&L items. It seems more probable that the £4m profit — which could almost be a rounding error on those revenues — is owing to the many new retailing challenges of the e-commerce age: the harrowing costs of reverse logistics; the gnawing cost of customer acquisition in an increasingly competitive digital marketing space; the asymmetry between customers’ proclivities to publicly cite sustainability but privately buy cheap; the difficulties maximising LTV with a loyalty procured by too-good-to-be-true retail terms rather than by brand value — all the contemporary issues that seem to be mysteriously crowded-out by antediluvian retailers that are given to exhausting the available oxygen with complaints about property costs.

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