Has Asos finally turned a corner?

The online fashion retailer's shares are bang on trend again, despite a slump in profits.

by Jack Torrance
Last Updated: 02 Sep 2015

It looks like the trendy online clothes seller Asos could have finally put its year of woe behind it. Though its shares remain way below their peak of 7,050p last March, they’ve been growing steadily for the last few months and were up 6.8% to 3,875p this morning after the company released its half-year results.

The boost comes despite a 10% drop in pre-tax profits to £18m, but then analysts were expecting a figure as low as £16.3m. It seems investors were also swayed by Asos’s more impressive revenue figures. Though international sales were up just 5% to £305m, in the UK they shot up 27% to £231m. Total growth was 14%, bringing the overall sum to £550m.

The company’s CEO and founder, Nick Robertson, said the profit dip was caused by the decision to launch ‘zonal pricing’ (i.e. pricing in local currencies, instead of converting directly from the pound) in key international markets, a move seen an necessary for maintaining growth.

‘With our continued investment in our international price competitiveness gaining traction, momentum in the business is building,’ he said. ‘This gives us confidence in the outlook for the second half and that full year profit and margin will be in line with expectations.’

The news follows a difficult 2014, in which the retailer issued three profit warnings and its main warehouse in Barnsley was significantly damaged by a fire. Robertson himself sold around £20m worth of shares in January, though it’s thought this was to settle a tax bill rather than because of a lack of confidence – his remaining stake is worth hundreds of millions.

Asos is certainly back where it wants to be in its home market, but currency troubles and low growth in the Eurozone continue to be a drag on international sales. If and when that's resolved, it seems to be in a strong position to go for growth again, but for now there's only so much Robertson can do.

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