Asos soars again, launches new Estée Lauder relationship
Apr 11, 2018
It’s sometimes difficult finding something new to say about Asos results. After all, how many different ways can you say “sales and profits surged”? So is there anything new to say this time? Of course not, because in the six months to February 28, sales and profits… well, they surged again.
The pureplay e-tailer really is one of the highest performing businesses, not just in British fashion, but globally. And in the first half its group revenues rose 27% to £1.58 billion, or 25% currency-neutral. Retail sales were also up 27% to £1.131 billion, and even retail sales in the UK – which is a troubled fashion and retail market at the moment – rose 22% to £414.5 million. International retail sales rose an even higher 31% to £716.8 million, with a 28% rise currency-neutral.
Of course, the big question is, did this translate into profits? Admittedly, pre-tax profit didn't rise quite as much, but the first half’s profit is historically lower than that of H2. This time it was up 10% to £29.9 million and the gross margin rose to 49.2% from 48.3%. However, its shares fell on Wednesday as investors fretted that profit didn't grow faster and also that increased capex investment could dent profits further.
1 BILLION LANDMARK
The company said it saw continued strong customer engagement with active customers up 17%, the average basket value rising 2% and order frequency up 8%. It saw 28% more orders year-on-year with 29.9 million orders placed in total. And its site visits exceeded 1 billion for the first time ever in this half.
And that growth curve should continue with the company progressing well on its Euro hub phase 2 that will allow it to deliver even more goods in Europe, and its US hub phase one opening early. Asos said these projects are helping it build towards £4 billion in net sales.
The H1 results allowed it to stick with its profit guidance for the full year with expectations of a rise between 25% and 30%. And its medium-term reported sales growth guidance remains unchanged at between 20% and 25% up.
What did CEO Nick Beighton have to say about all of this? He was understandably upbeat: ”These results show strong trading at the same time as we are making substantial investment in our future. Our customer engagement is going from strength to strength. Alongside our investment in our people and our technology, we are accelerating investment in our distribution and logistics, laying the foundation for £4 billion of net sales, a further step in building Asos into the world's number one destination for fashion loving 20-somethings.”
And his bullishness certainly seems to be justified. That 22% sales growth in the UK is impressive at the current time, as is its 32% sales growth in the EU (currency-neutral) with active customers there growing 26% to over 6.3 million. US sales were up 27% with active customer numbers up 10% to 2.2 million, again, a good result in a market that has been challenging for some European players. And the rest of the world saw sales rising 24%, with active customer numbers rising 19% to 2.5 million.
The company said that the level of growth over recent years “remains at the top of our medium-term planning assumptions and we need to invest more quickly in our business to support this momentum” so it’s increasing its capex spend.
And what else is on the cards for the future? The company is continuing its product evolution, adding new brands and "editing out” others. It added 115 in the first half and removed a similar number. This will continue.
It's also creating more localised site experiences around the world and the next six months will see the addition of two new language-specific sites, although we don't know which languages they'll be. That expansion certainly makes sense as the company now has twice as many customers outside of the UK as inside its domestic market.
Asos also said that it is seeing an increasing share across expanding category segments such as Activewear and Face + Body, supported by highly visible brand campaigns. And while it didn't have news of any new category expansion, it did have news on the beauty front.
It said the Face + Body offer will be helped by a new relationship with the Estée Lauder group. MAC launched on the site last month and will be followed by many more brands from Lauder. Meanwhile, other launches in this category include House of 99 by David Beckham and an exclusive range with Crayola.
And those campaigns it referred to are targeting its 20-something audience where they spend most of their time. Its Instagram Stories were viewed over 30 million times in the first half and videos were viewed more than 52 million times, up from 40 million. It continues to experiment with pioneering advertising betas across key international markets, including Snapchat Promoted Stories.
Additionally, it will continue to increase its focus on its own brand, which is now known as Asos Design. This accounted for around 39% of sales in H1. New bands also had a big impact during the half, including Tommy Jeans, Morgan and Ivy Park. The combination of its own brand and exclusive collaborations with third-party brands means 55%-60% of product is only available to customers through the Asos sites, an additional important point of differentiation.
And as well as products initiatives, it's also boosting its whole service proposition with faster returns, incremental technology improvements, increasing customer privacy, and more.
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