Online clothing retailer Asos said better-than-expected first-half earnings had boosted the company’s full-year outlook as it predicted more consumers would continue shopping on the web after the pandemic faded.
The company, which benefited from the closure of a physical store in Europe, expects online penetration to “remain structurally higher than pre-Covid-19 levels”, although admits some customers will return to the highway.
Asos reported on Thursday that its pre-tax profit in the six months to the end of February was £ 106 million (€ 122 million), up from £ 30.5 million last year and above the average analyst estimate of £ 88 million.
The company said this would result in a full-year profit increase compared to its current forecast of around £ 160 million, but did not change its outlook for the second half of the year.
Analysts at Liberum said despite being successful in the pandemic and making progress on reducing costs, the company’s revenue growth “remains below the levels seen by Zalando and Boohoo colleagues”.
Shares of trading group Aim, which have made a spectacular recovery over the past year, were down 1 percent at lunch time on Thursday.
Asos has long been cautious about the possible economic impact of the pandemic on its customer base, which is mostly in their 20s and expects some of the “Covid hurricane”, which added £ 48m to first-half profit, to ease as the lockdown is lifted.
Clothes to wear out
The pandemic prompted a major shift in purchases from “out” clothing to clothes to wear around the home, especially in the UK.
Such clothing has a lower gross margin, but customers are also less likely to send it back, resulting in a better operating profit.
Nick Beighton, the chief executive, said there was already an increase in web searches for clothes to wear while traveling, especially in the US which allowed more socializing.
The UK, where ASOS has been active for more than two decades and where online penetration is already relatively high, continues to outperform newer markets.
Sales there were up 39 percent, more than double the increase in the EU or US. “We are always surprised by the rise in the UK,” said Beighton, adding that the focus in the medium term is to expand the ASOS brand in North America and Europe.
The company already has distribution facilities in both regions and recently launched a “truly global retailer” initiative that aims to treat inventory at all three locations as a single batch.
“We want to be able to have any product in any warehouse in any location available to any customer,” said Beighton.
Earlier this year, Asos agreed to acquire Topshop, a one-time gem in Sir Philip Green’s retail empire, outside of administration. It said the one-time costs associated with company integration would be £ 10 million this year, rather than the initial estimate of £ 20 million.
Engagement with brands has been strong in the US and German in particular, and the first Asos-produced clothes are expected to go on sale on Black Friday in November.
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