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Apr 4, 2017
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Asos powers ahead in first half, is now a mobile-first e-tailer

Apr 4, 2017

You have to hand it to Asos. This is one company that knows how to sell fashion. Just look at the figures released Tuesday morning. Group revenues: up 37%. Retail sales: up 38%. UK retail sales: up 18%. International retail sales: up 54%. Gross profit: up 36%. Pre-tax profit: up 14%.

Asos seems to be doing everything right at present

That all came as its m-commerce transactions headed towards 60% of its total, its Activewear offer launched, it became an early adopter of innovations from social media networks, it boosted its logistics capacity for Europe and it worked on a plan to grow faster in the US, the firm’s third-largest market.


In the six months to February 28, the company sold £889.2 million worth of goods at retail and £548.4 million of that came from outside of its domestic UK market. It made £440.1 million in gross profit and £27.3 million in pre-tax profit.

A weak spot - well, a spot that was slightly weaker than others - came with margins The retail gross margin dipped to 47% from 47.4% and the overall gross margin dropped from 48.9% to 48.3%.

But apart from that it was good news all the way. The 38% retail sales rise may have been boosted by exchange rate fluctuations, but the company saw an almost-as-impressive 31% rise on a constant currency basis.


The UK rise of 18% was strong, despite the “more promotional market,” and the international rise may have been boosted by the “FX tailwind” but at 42% in constant currency, it showed just how buoyant the business is abroad.

Asos also said it saw continued engagement from its customers with active customers up 29%, the average basket value was up 3% and average order frequency was up  4%. The total number of orders shipped was 23.3 million, a rise of 33%.

It allowed the company to revise its reported sales growth guidance to around 30% to 35%.

It may have been an understatement when CEO Nick Beighton said “these are a strong set of results” but he showed a bit more bullishness when he added: “Asos is making good progress towards its ultimate goal of becoming the world's number one destination for fashion-loving 20-somethings.”


So what was there in the detail of Tuesday’s report that can shine some more light on Asos’s approach?

The company has invested a lot of time and money into its pricing strategy and said one of the reasons for its sales growth was “great product at relevant prices coupled with excellent delivery propositions and engaging content.” Of course, currency effects helped too. As a net exporter, sterling weakness created a foreign exchange tailwind for the business “which has enabled investment above previously planned levels into both price and proposition.” As a result, UK sales grew fast despite the tough market, and the rest of the world powered ahead.

The company said its margin dip came as it “further invested into international price coupled with prior year price investments yet to annualise, particularly in the EU.” Also, third-party revenues rose by 15%, another margin reducer.


But the overall good results came as the company launched several key product, marketing or logistics initiatives.

Its Activewear collection debuted in the period. Initially this focused on product extensions with existing brand partners including Nike, Adidas, Puma and Reebok, alongside the sportswear collections of some better known fashion brands such as Ted Baker, New Look, Free People and Missguided.

Its own Asos Activewear collection will launch later this year, alongside the core own-label ranges. Performance fabrics and technical constructions will be included to cater for training, running, dance and yoga with further extensions to the range at a later point.

The company also said it continues to work with third party brands “to ensure the most relevant edit of collections for the season, from collaborating with some of the largest global retailers on exclusive colours and prints to new and emerging brands.” And it added that: “We increasingly utilise social networks, Asos Marketplace and our new Fashion Discovery Project to help us remain at the leading edge of young fashion globally.”

The retailer is also constantly refreshing its brand portfolio. This season alone it has added 100 new brands while removing a similar number. New brands include Under Armour, Miss Selfridge and Burton in addition to locally sourced names like Adolescent Clothing, RVCA, Current Air, and EFLA. Exclusive collaborations have continued with Asos White x Saucony, Asos x Wah London and the Asos x House of Holland for Centrepoint.

These exclusive link-ups, when combined with its own-label products, results in 60% of all sales on its platform being exclusive to its customers.

Mobile has been key for the period too. The rollout of the New Mobile Checkout on all its digital channels has been successfully completed. Over the last six months, daily app downloads have seen a 28% increase. Its customers have visited the apps eight times a month on average, spending more than 80 minutes during this time. Mobile visits are now around 70% of total traffic (up from 60% a year ago) and 58% of orders are placed from a mobile device, up from 51%.

Across social channels, it continues to see growth in followers and engagement levels. The global audience has grown by 25% to 21.3m followers in the last six months.


And the company has been an early adopter of emerging content formats such as shoppable Instagram stories, Instagram Live, Facebook Live, Facebook Canvas and Snapchat lenses across key channels, enabling it to connect with its audience in new ways.

This has led to encouraging results, with 100,000 views per video/broadcast produced, reaching 32m people with the Asos Snapchat Black Friday lense, and engaging more than 13m people across the US and the UK with the launch of Instagram Stories advertising.

This has all helped it achieve improvements in its customer engagement levels. This includes growth in visits of 27%, 4% growth in average order frequency, 3% growth in average basket value and 10bps improvement in its conversion rates.


The firm is highly focused on boosting its international ops. In the first week of March, the company transitioned over 2m units of stock from its existing Eurohub 1 facility just outside of Berlin to a brand new purpose designed and built fulfilment centre, known as Eurohub 2. The warehouse has more than doubled its stockholding capacity in mainland Europe and almost quadrupled throughput capacity, as well as providing greater capability and opportunity “to improve the customer proposition”.

Over the next three months, operations will continue to ramp up in Eurohub 2 with the receipt of stock and shipping of orders, which will reduce the need to transfer stock between warehouses and ultimately prepare it for the first phase of Global Fulfilment. This programme will enable it to fulfil 100% of orders to Germany, France, Spain and Italy from Eurohub 2 compared to the previous roughly 50% fulfilment levels from Eurohub 1.

Its US operation continues to fulfil around 25% of all US orders, with the remainder being despatched from the UK. As its third largest market it wants to boost efficiencies in both cost and time to serve current and future US customers and has recently undertaken an extensive network modelling exercise to identify the optimal location for its US fulfilment centre. It expects to have decided on that location very shortly and for a site to be quickly identified thereafter.

All in all, it was a powerful interim results statement. It will be intriguing to see whether Asos can maintain its growth rates as comparisons are getting tough. But it is clearly investing in the right areas to continue its growth trajectory. We await its next trading update with interest.

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