ASOS sales growth slows on Covid-19 uncertainty

Online fashion retailer ASOS warned on Thursday that recent sales growth had slowed as uncertainty over the direction of Covid-19 and poor weather, particularly in Britain, dented market demand, sending its shares sharply lower.

Shares in ASOS, which sells fashion aimed at 20-somethings, were down 14.1 per cent at 10.26am Irish time , after the group said sales rose 21 per cent in the four months to June 30th but were “more muted” in the latter three weeks of the period.

"Uncertainty, particularly around changes to travel rules and hence the ability of people to book holidays, means that customers are finding it difficult to plan their lives and wardrobe choices," CEO Nick Beighton told reporters.

He said an unseasonal summer so far, especially in the UK, had also led to unexpected swings in demand.

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“One week we saw searches for coats up 77 per cent and the following week searches for evening dresses more than doubled,” he said.

ASOS anticipated trading volatility would continue in the near term, given the rapidly evolving Covid situation worldwide.

As a result, it forecast its underlying growth rate for the balance of its 2020-21 year to be broadly in line with the prior year period. It still forecast overall full year adjusted pretax profit in line with its expectations.

ASOS has traded through multiple coronavirus lockdowns while store-based rivals have had to close shops.

Higher freight costs

Total revenue was £1.29 billion (€1.51 bn)in the four months to June 30th, up from £1.1 billion in the same period last year, as its active customer base increased by 1.2 million to 26.1 million.

But gross margin fell 150 basis points reflecting unfavourable foreign exchange movements, higher freight costs due to global supply chain disruption and a category product mix still weighted to lockdown leisurewear.

It noted that product mix, and higher returns rates, had started to reflect a shift back into occasion wear in recent weeks as Covid restrictions eased.

It said the global supply chain pressures were being driven by global freight capacity shortages and delivery delays coming out of key areas of supply.

Prior to Thursday’s update analysts’ average forecast for full year 2020-21 adjusted pretax profit was 198 million pounds, up from £142.1 million in 2019-20.

ASOS bought the Topshop, Topman, Miss Selfridge and HIIT brands in February from the administrators of Philip Green's collapsed Arcadia group for £265 million. On Monday it formed a joint venture with US retailer Nordstrom. – Reuters