Asos dressed to impress as profits jump 60%

More spectacular numbers for the online retailer as it cashes in on international sales - but things are (a bit) tougher here at home.

by Emma Haslett
Last Updated: 06 Nov 2012
Lots of British retailers may be struggling at the moment, but not Asos: the online retailer, which sells sleb- inspired wares at high street prices, raked in £7m of profits for the six months to September. That's 59% up on last year. The lion’s share of its growth has come from the US, France and Germany, where the company has launched new websites over the past few months - although in the UK, still its core market, growth has actually dropped since the previous quarter, from 32% to 21%. Then again, most retailers would kill for numbers like that - and Asos insists it's well on course to be turning over £1bn by 2015...

Revenues for the company rose by 45% - partly driven by international sales, which surged by 120% to £48.9m, meaning they now account for 37% of turnover. UK sales growth was slightly less spectacular - but part of that slowdown might have been driven by a new returns policy, which allows customers to return their unwanted items to physical shops (including, weirdly, Costcutter). For customers, it’s great – if that backless sequin number proves a little too revealing, they can take it back without having to faff about with postage. But for Asos, it has led to a rise in the number of returns (though in the long-term, the policy will hopefully boost the number of customers).

So Asos is still going great guns in the UK - and overseas customers seem similarly enamoured. Having launched new websites for Germany, France and the US over the past three months (customers from abroad previously had to pay to have their items shipped from the UK – although that didn’t seem to put them off, since overseas orders already made up 25% of income), the company now plans to expand its distribution centre. The new and improved warehouse in Barnsley is expected to be ready by spring 2011, and will be large enough to process £600m worth of clothes a year.

But while its customers may be clamouring to get their paws on this season’s sheepskin Cossack hat (yes, Mum, that’s a hint), analysts aren’t quite as convinced. Last week, broker KPC Peel hunt downgraded Asos’ shares after it said that that £1bn revenue target was too ambitious, adding that it ‘illustrates a lack of breathing room for any slip-up’. And that slow-down in UK sales also hasn’t gone down very well: Arden Partners downgraded Asos’ shares this morning after it voiced concerns that management is focusing too much on US growth, and not enough on signs of increased competition at home.

Still, those seem like minor quibbles when you take into account Asos’ stratospheric growth since it first launched in 2000. Confirmation, if it were needed, that its core market of teenagers and twenty-somethings are about as recession-proof as markets get, at least when it comes to new threads...

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today