Asos bucks grim retail trend with sales surge
ASOS looks set to shrug off the gloomy outlook facing the British retail sector with another jump in sales when it reports interim results tomorrow.
Sales at the fashion retailer are expected to outstrip the wider UK market, but the lion’s share of the boost will come from a powerful overseas performance.
The firm is expected to notch up a 27% rise in pre-tax profits to £27.1m for the half-year, with group sales hitting £901m for the period.
Asos, which stands for As Seen On Screen, said earlier in the year that annual sales were likely to be 25% and 30% higher after international takings leapt 52% to £361.7m in the four months to the end of December.
The company’s global business has been riding high – driven largely by the US – after reinvesting a currency boost from the Brexit-hit pound.
Shore Capital analyst George Mensah said the firm also looked likely to benefit from a number of US retailers dropping out of the marketplace.
He said: “Much of the growth the business is experiencing is coming from the international business, which overall we expect to see around 50% increase in revenue. US sales, aided partly by a plus 20% currency tailwind, will continue to grow comfortably ahead of the group average, with 60% growth on the prior year’s interims according to our forecasts.
“The disruption of e-commerce appears to be making several store-based US apparel retailers redundant and Asos has positioned itself to be a beneficiary of the secular change in how the US consumer shops.
“UK sales are still growing ahead of the domestic apparel retail market and we expect this to have continued during the first half; we have an 18.2% growth rate pencilled in.”
It comes amid tough trading for British retailers. Paula Nickolds, new boss at department store chain John Lewis, warned of a “turbulent and challenging” high street amid cost pressures from the pound and a dramatic shift in consumer spending.
Lord Wolfson, chief executive of Next, has also warned of another tough year ahead as the hight street giant grapples with a slowdown in consumer demand.
Asos announced plans in December to hire another 1,500 people over the next three years to work at its London headquarters. It said it would take an additional 40,000 sq ft to house the extra workers and spend £40m on renovating the space in Camden.
The firm has been dogged by claims of poor working conditions at its warehouse in Barnsley, south Yorkshire, but Asos has consistently said the allegations are “inaccurate and misleading”.