Sales slow at Asos

Asos , the online fashion retailer posted 47 per cent sales growth in the first half of last year, is seeing a slow in growth. For the five weeks to 3 January 2010 Asos Sales were up 30 per cent year on year. Total sales rose 38 per cent year-on-year in the 42 weeks to January 17, in line with company guidance but slowing from growth of 47 per cent in the first half.

Nick Robertson, chief executive, told the Financial Times on Monday the company still outperformed many leading retailers, with international sales more than doubling in the 42 weeks to January 17 and UK sales up 25 per cent. “There isn’t another big retailer growing at these rates.”

International sales doubled but at a slightly lower rate than in the first half. They were sharply lower than the quadrupling in the year to March 2009.

“The problem we’ve got is comparables. This time last year international was growing at 300 per cent,” said Mr Robertson. “You can’t keep growing like that.”

The issue of slowing growth is familiar to any company that has enjoyed a meteoric rise in sales. Not only do comparatives get tougher, but the market may become saturated as competitors emerge and investment is needed to build capacity.

Asos’s remarkable ascent in the UK – it has carved a niche in providing celebrity-inspired fashion for the 16-34 age group – has begun to flatten off in the past year, echoing a moderation in growth of online retail in general, but also as other retailers enter the market.

“Asos has been the run-away winner in the early ramp-up of the UK online fashion market and is a clear contender to be one of the long-term winners,” said Peter Smedley, analyst at Charles Stanley Securities.

“But while there weren’t a lot of competitors initially, everyone is now increasing their online clothing offer. Asos are still ahead of the other online players, but the gap is shrinking,” he added.

Sales in the five weeks to January 3 rose 30 per cent. Analysts said close inventory control over Christmas may have meant Asos was understocked on the most in-demand items.

However, tight stock management also meant the company avoided the discounting of last year, boosting gross margin by 80 basis points in the five-week period.

Mr Robertson said he was comfortable with consensus forecasts for the company to report pre-tax profit of £20m, up from £14m, on sales of £230m (£165m) in the year to March 31.

Shares in Asos fell 32¾p to close at 435¼p. They had risen 60 per cent in the past year.

Image: Asos