Jul 13, 2016
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Weaker pound after Brexit vote may actually boost sales for Asos

Jul 13, 2016

British online fashion retailer Asos expects to benefit from the sharp depreciation of sterling versus the U.S. dollar in the wake of the UK's decision to leave the European Union, its boss said on Tuesday.

With over half of Asos' sales generated from outside of the UK the firm is also insulated from any downturn in demand in its home market following the Brexit vote.

Photo: Asos

Britain's shock vote last month to quit the EU has stunned financial markets, with the pound bearing the brunt of the early violent reaction, tumbling to a 31-year low against the dollar.

"Our sales prices which are denominated off sterling now look cheaper to the U.S. customer and look cheaper to the European customer," Chief Executive Nick Beighton told reporters on Tuesday.

"What we think that will give us is a greater sales trajectory," he said.

Beighton was speaking after Asos reported better than expected second half sales, sending its shares up to 6.5 percent higher.

He said the anticipated sales uplift would more than offset the negative impact of higher sourcing costs. The basic raw material of many of Asos' garments is cotton, which is denominated largely in dollars.

Beighton said it was too early to predict what the long term consequences of Brexit would be for the UK and Asos.

Established in 2000 for fashion-conscious twentysomethings, Asos was an early e-commerce success story, but is seeing growing competition from the likes of Germany's Zalando and British rival Boohoo, as well as from traditional store-based chains improving their online offerings.

The firm said total retail sales rose 30 percent to 500.5 million pounds ($654.1 million) in the four months to June 30.

That was ahead of analysts' average forecast of growth of 22.9 percent and growth of 21 percent in the first half of its 2015-16 financial year.

UK sales rose 28 percent, while international sales increased 31 percent with sales growth acceleration across the U.S., European Union and Rest of World segments.

Asos now anticipates sales growth for its full 2015-16 year at the upper end of the 20-25 percent range previously guided and is confident of delivering analysts' pre-tax profit expectation of 62 million pounds on a continuing business basis.

Retail gross margin for the period fell 180 basis points, in line with guidance and reflecting price cuts. Full-year guidance of an up to 50 basis points decline was maintained.

Shares in Asos, which listed at 20 pence in 2001, have increased 43 percent over the last six months.

They were up 4 percent at 4,474 pence at 0844 GMT, valuing the business at 3.7 billion pounds.

($1 = 0.7652 pounds)


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