ASOS sales still rising strongly, despite Covid pressures
ASOS has seen another good trading period with the four months up to the end of June (P3) enjoying healthy revenue growth, despite volatile demand, increased global supply chain pressures and continued restrictions on everyday life.
However, on Thursday, the online fashion retail giant, also said that trading in the final three weeks of the period “was more muted”. This came as unseasonal weather in its biggest market — the UK — and ongoing uncertainty over the pandemic due to rising case rates took their toll.
It expects a certain amount of volatility to continue in the near term as well, particularly as Covid Delta variant continues to increase infections in certain markets globally.
But it still believes that the global opportunity for the company to grow in its targeted markets is “greater than ever”. And that view was certainly justified in recent days when it announced its deal for the Topshop brand with Nordstrom in the US.
The company operates by a different calendar to many retailers with its Period 1 covering, the four months to 31 December, P2 being just January February, P3, those four months to late June and P4 just July and August.
Looking at P3 in pure numbers, the company said that UK retail sales rose 60% to £526.4 million, although they only rose 36% when adjusted to reflect the underlying sales performance for prior year returns provision phasing.
Its retail sales in the EU grew 18% to to £388.3 million. That was an even bigger 20% at constant currency (CCY), but was only +14% on a reported/adjusted basis or +15% adjusted/CCY.
In the US, they were up 16% (or 31% CCY) to £144.8 million. On an adjusted basis, they rose 7% reported and 20% CCY.
And in the rest of the world, retail sales actually fell 9% to £186.2 million, although were only down 2% CCY. On a reported/adjusted basis, they fell 10%, or 3% CCY.
Total international retail sales rose 9% to £715.7 million or 15% CCY, but adjusted, they were up only 5%, or 11% CCY. That took total retail sales 26% higher to £1.242 billion (+31% CCY) and 16% higher on an adjusted basis (+20% CCY).
It's clear from this that the UK was a strong market during the period (as it has largely been for the company throughout the pandemic), and it also called out an acceleration of demand in the US. The improvement in US growth rates reflected the “improved stock offer, increased demand for going-out and occasionwear product, the impact of stimulus cheques and the removal of many restrictions”.
It saw “good growth” in the EU, “underpinned by particularly pleasing growth in Germany, despite various levels of Covid restrictions remaining in place for much of the period”. Southern Europe performance “was more challenging, with tourism-related economic pressures disproportionately impacting 20-somethings' prospects”. It said its product offer and customer experience continued to resonate with consumers “despite Brexit-related challenges impacting on our supply chain flexibility”.
The weaker trading in the rest of the world was affected by Covid-related disruptions to its delivery proposition in comparison to local competition.
And it faced foreign exchange headwinds that dented its gross margin by 150 bps. Higher freight costs and the product mix continuing to feature categories that were stronger during lockdown had a negative effect here.
But the company also said that the product mix and its associated returns rates "have started to reflect a shift back into occasionwear in recent weeks”. It's worth remembering that during the lockdown as consumers bought more loungewear, returns rates were much lower than usual, but they’re now heading back to more normal levels.
ASOS is continuing to invest heavily in growth but said the P4 growth rate is expected to be broadly in line with the prior year comparable period on an underlying CCY basis, with returns rates normalising at an increasing rate. Global supply chain environment pressures are also set to continue, but full-year adjusted pre-tax profit (excluding brands acquisition and integration one-off costs and amortisation of acquired intangible assets) should be in line with expectations.
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