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Sales soar at Asos, driven by “exceptionally strong” UK performance

Last updated: 03:56 25 Jan 2018 EST, First published: 03:43 25 Jan 2018 EST

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At £5.6bn, Asos is worth more than some of its FTSE 100 rivals such as M&S

Online fashion retailer Asos PLC (LON:ASC) saw sales soar over the Christmas period, driven by an “exceptional performance” in its core UK market.

Worries over an economic slowdown have affected some of its peers, but the junior market’s biggest company brushed off any concerns that it would meet a similar fate.

UK sales growth accelerates

UK retail sales rose 23% to £300.9mln (2016: £244.0mln) – the kind of growth high street rivals such as Debenhams PLC (LON:DEB) and Next Plc (LON:NXT) could only dream of – in the four months to December 31.

In the same period of 2016, Asos’ UK sales grew by ‘just’ 18%, with shoppers taking a particular liking to a new same-day delivery option and a ‘Try Before You Buy’ feature this time around.

Total sales – which includes contributions from the US, Europe and the rest of the world – jumped 30% to £790.4mln (2016: £605.7mln), above the top end of its guidance

In line with its plans, gross margins were up 80 basis points year-on-year.

Confident for 2018

“I'm pleased to report a strong performance during the period including peak,” said chief executive Nick Beighton.

“We achieved an exceptional performance in the UK, whilst momentum in international sales continued.

“Following this strong start to the year, we remain confident in our full-year guidance and delivery of our planned investments in infrastructure to support our global ambitions.”

As Beighton mentioned, the retailer made no changes to its financial guidance for this year, although it did note that capital expenditure in 2018 is expected to be at the upper end of its previously indicated range of £200-220mln.

Showing traditional retailers how it's done​

"While clothing sales at M&S went backwards over the festive period, and Next was applauded by the market for eeking out 1.5% growth, ASOS is making retail look easy by turning over almost a third more sales than last year," said Hargreaves Lansdown analyst Laith Khalaf.

"The online fashion retailer has proved very successful at attracting new customers, while at the same time increasing the amount existing customers are spending.

"ASOS earns its crust from millennials, and has over 80 content producers tasked with showcasing its wares on social media, because it knows this is a key battleground for the attention of its young target audience."

Khalaf adds: "ASOS isn’t shackled with a dividend payment either, because shareholders are happy for it to reinvest for further growth, such are the global opportunities in front of the company. However, with a share price trading around 70 times earnings, ASOS needs to keep growing fast to keep up with market expectations."

With shares having hit all-time highs earlier in the week in anticipation of the update, investors used the good news to cash in. Shares were down 0.6% to £68.34 early on Thursday.

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