Pandemic boom for Asos as profits triple
. . . and fashion giant says online shift is here to stay
ASOS cemented its status as a lockdown winner as profits more than trebled.
In another bumper set of results, the online fashion retailer posted a 253pc rise in profits to £106.4m for the six months to the end of February after sales jumped 24pc to £2bn.
And striking a bullish note about life after lockdown, it predicted customers will continue to flock to its website in growing numbers even after shops reopen on Monday.
The fortunes of Asos and online rivals such as Boohoo are in stark contrast to those of a number of once mighty High Street players.
In a sign of how the balance of power has shifted, Asos recently bought the Topshop and Miss Selfridge brands out of administration following the collapse of Sir Philip Green’s Arcadia empire.
And Boohoo rescued the Debenhams brand – but not its stores – after the 242-year- old department store chain went bust.
Writing in the Mail today, Marks & Spencer chief executive Steve Rowe admits it has been ‘a bloody tough year’ on the High Street as Covid lockdowns forced many stores to close.
But he adds: ‘ People are still shopping. They’re just shopping for different things and in a different way. I don’t subscribe to the naysayers who proclaim shops and the High Street are dead. They just need to change, as does our understanding of what they do.’
Shares in M&S remain nearly 30pc down since the start of 2020, while Asos shares have risen almost 70pc.
Unveiling its bumper results, Asos said it won 1.5m customers over the six months to the end of February, taking the total to 24.9m.
It also benefited from what it described as a ‘Covid-19 tailwind’ worth £48.5m that will reverse once consumers can spend their money eating out and travelling again.
But it insisted that demand for online shopping would outlast the pandemic.
It said: ‘We are confident that with the return to normal life, underpinned by the successful vaccine rollout in some of our key markets, we will see further strong momentum in this brand.
‘The shift to online retail as a result of the pandemic and the accelerating consolidation of offline retail has increased consumer confidence in shopping online.’
Margins will also improve as demand for ‘ sassy and sexy’ dresses and partywear for its ‘generation me’ customers bounces back, and Covid-19 freight costs normalise.
The UK outperformed Asos’ international markets with sales jumping 39pc to £800.4m in the six-month period, which covered the second English lockdown in November and the current restrictions.
Business was more muted in its other markets with sales growing 18pc in Europe, 16pc in the US and 16pc in the rest of the world. Overall revenue growth ‘remained below the levels seen by peers Zalando and Boohoo’, according to analysts. Shares fell 3.4pc to 5590p.
Asos said the integration of Arcadia brands Topshop, Miss Selfridge and HIIT – which it bought out of administration earlier this year for £330m – is also progressing to plan. It said the brands have garnered ‘ impressive early customer engagement’.
Steve Rowe: Don’t believe anyone who says the High Street is dead!
ON MONDAY, shopkeepers large and small will begin reopening their doors to customers. the feelings they have will be mixed. Hopeful that this will be the last time they have to put their lives and businesses on hold, excited to welcome back the customers they love and apprehensive about the shift in shopping habits we’ve witnessed this year.
the pandemic hit the fast-forward button on the seismic upheaval that was already in train long before Covid.
Frankly, it’s been a bloody tough year, and its impact has been huge. We’ve said goodbye to some much-loved names from the High street and however competitive my sector is – and it is – it’s always sad to see businesses close.
the crisis has accelerated the structural changes already under way in retail, from the rapid adoption of online, declining store footfall, move to cashless – even till-free – payment or renting as well as buying products and services.
these trends are exacerbated by lifestyle changes like the rise of home working and the shift to more casual dressing. And yet, underneath it all, people are still shopping. they’re just shopping for different things and in a different way.
throughout the crisis, at M&s we’ve seen just what we’re capable of when we act with pace and agility to respond to customers changing needs.
our stores have become more efficient than ever – we’ve rapidly increased online clothing orders picked, packed and distributed direct from store.
And this gets me to the crux of my argument. i don’t subscribe to the naysayers who proclaim ‘shops and the High street are dead’.
THEyjust need to change, as does our understanding of what they do. For bricks-and-mortar retail to succeed, retailers must deliver efficient, inspiring, and well located shops.
these can be a true source of competitive advantage and the place where the joy of shopping comes to life.
Great shops are a hub of expertise. our in- store bra- fit has been a much-missed service, and while we successfully pivoted to online customer consultations with our fit experts, when we trialled a contact free bra- fit in stores last December, it was booked out in multiple locations as customers longed to get back to face-to-face advice.
And we all know that the social element of shopping, and making a day of it, is impossible to replicate online.
shopping remains a core part of how we connect as a community. our amazing store colleagues are testament to that. And if the last year has taught us anything it’s the true value of human contact.
However, they must be part of an offer that blends the digital and physical because that’s how customers – and in our case our most valuable customers – want to shop.
it shouldn’t be overlooked that in recent months some of the biggest online retailers have invested in bricks and mortar.
shops are a vibrant and vital part of British life – as good-quality, scale employers and as anchors to communities up and down the country. the answer to securing retail’s future – and that of our High street and town centres – is two-fold.
Firstly, to thrive, the High streets need to be vibrant community hubs, which is no longer solely a retail debate, and they must be underpinned by vibrant economies.
Given the shock of Covid, the Government’s levelling-up agenda is more urgent than ever before.
secondly, it’s not to fall into the trap of saying ‘retail equals online’ but to reimagine what bricks and mortar retail is. to do that, we need right support. that support must not restrict online growth, far from it – that’s a zero- sum game that helps no one.
For the sake of all rate payers, business rates reform cannot be kicked down the road once again.
However, the solution should not be another levy on the already over- burdened retail sector through an online sales tax.
For the High street to thrive, retailers will need successfully blended online operations too.
An online sales tax would hit the retailers that policy makers are trying to help and curtail their ability to compete through their physical stores.
the fairest and most sustainable way to tax is based on profit. We hope the increases in corporation tax can be used in part to lower the burden of business rates.
But this will only work if we tackle the fundamental issue of those who do not contribute as they should and the presidency of the G7 provides the ideal platform to address the taxation of multinational businesses.
As the future of the High street is debated, we need to have the right policy framework to support innovation and blending physical and digital retail, not stifle it.
What i do know, is retail has an unbelievable ability to adapt.
And i, for one, will be there to welcome customers through the door on Monday, as the next chapter begins.