Asos profit jumps 145 percent, raises FY18 sales outlook

Asos has reported retail sales growth of 34 percent to 1,876.5 million pounds (2,484 million dollars) for the year to August 31, 2017, driven by strong product, proposition improvements and further price investments across major markets. Continuing profit before tax and exceptional items grew by 26 percent to 80 million pounds (105 million dollars), while profit before tax jumped 145 percent to 80 million pounds.

Commenting on the annual trading performance, Nick Beighton, Asos CEO, said in a press statement: “It’s been a great year for Asos, with continued growth in sales and profits. Our international performance was excellent, as we reinvested FX tailwinds and benefitted from our continually improving customer proposition. In a competitive UK market, we achieved strong full price performance whilst further increasing market share. The investments we are making will see us add 1,000 new heads and will lay the foundations for a 60 percent increase in unit capacity and 4 billion pounds of net sales.”

Highlights of Asos’s annual results

The company said, as previously noted, the continuing FX tailwind enabled reinvestment at a faster rate than initially planned. Retail gross margin increased by 10bps to 48.6 percent as price investments in the US, Europe and some RoW territories were offset by a higher full price mix. Delivery receipts grew 18 percent aided by higher next-day delivery usage and the expansion of Premier globally.

The group generated retail sales growth of 34 percent during the year, with UK growth of 16 percent to 698.2 million pounds (925 million dollars) and strong international growth of 47 percent or 36 percent constant currency to 1,178.3 million pounds (1,561 million dollars), driven by investments in price and proposition. International retail sales accounted for 63 percent against 57 percent last year, of total retail sales.

Asos said, UK retail sales grew by 16 percent, a solid performance in a more promotional market. The A-List loyalty scheme, which annualised during the year, continued to aid increases in conversion and average order frequency. US retail sales grew by 46 percent or 31 percent in constant currency driven by price investments and the annualisation of improved delivery propositions coupled with key promotional events.

EU retail sales grew by 45 percent or 34 percent in constant currency aided by the introduction of free returns across the whole of the EU, alongside prior year price investments annualising. RoW retail sales grew significantly at 52 percent or 42 percent constant currency, driven by further price and proposition investments. Russia and Israel, the company said, were the stand out performers, achieving triple digit sales growth of over 200 percent and 150 percent respectively.

Delivery receipts increase of 18 percent lagged retail sales growth as customers increasingly took advantage of more extensive free shipping options. The number of premier customers increased by 55 percent.

Asos saw site visits increase by 24 percent year-on-year; average order frequency improved by 5 percent; average basket value increased by 2 percent alongside a 20bps improvement in conversion. Active customers are now at 15.4million, representing a 24 percent increase since last year.

Asos invests in technology platform, to launch new activewear label

The company added that rollout of Asos’s new technology platform delivers micro-service architecture with fully native mobile experience in android and iOS apps and a vastly improved all new checkout. The platform allows for significantly greater transaction volume at enhanced levels of stability. The company continued to increase capacity and efficiency at Barnsley, successfully transitioned to phase 1 of the new Eurohub 2 fulfilment centre with ongoing work to further double its capacity and automate its operations.

In August, Asos signed a lease for a new fulfilment centre in the US, which is expected to be operational by Autumn 2018. The company expects investments Asos is making across logistics will lay the foundations for a 60 percent increase in unit capacity and 4 billion pounds (5.3 billion dollars) of net sales per annum.

The company said, sales of Asos brand account for 41 percent of sales. Each week 5,000 new styles are launched with 85,000 products in stock at any one point in time. Almost 200 new brands were introduced during the year whilst a similar number were edited out. Building on last year’s launch, Asos is accelerating its activewear offering, with football and golf ranges now accompanying sports performance wear including gym, run and yoga. The Asos 4505 activewear range will launch in 2018 along with range extensions into snow and surf.

The company added that with it ‘Fashion with Integrity’ initiative, the company aims to ensure that the production of our products causes no negative impact on the environment. ASOS joined the Sustainable Apparel Coalition, giving Asos insights into environmental management systems across water and chemical management. Asos also signed the Cotton Communique with the Clarence House International Sustainability Unit, committing to 100 percent sustainably sourced cotton by 2025 and are on track to hit a sustainable cotton target of 70 percent for 2017. The company signed the commitment to a Circular Fashion System (Global Fashion Agenda, Copenhagen) to support the transition to a ‘circular business’.

Asos raises sales guidance for FY18

The company said, new financial year has started well. Its increased sales guidance is 25-30 percent for FY18 inclusive of a modest FX tailwind, with EBIT margins stable at 4 percent in line with market consensus. Medium term reported sales guidance of 20 percent-25 percent, Asos said, is unchanged. The company expects EBIT margins to remain at a similar level into the medium term, with operating leverage in payroll and distribution offset by ongoing investment in technology and warehousing infrastructure to support continued growth.

Currently Asos has seven country specific websites. For the first time in four years, the company will add new local foreign sites, up to 13 by the end of FY18, ultimately giving the potential to cover all of 200 markets. Also to further drive global growth, the company plans to launch additional payment methods, new language sites and delivery propositions.

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