Asos profits 22% down as it ramps up expansion

The online fashion retailer has invested heavily in warehouses, and sets ambitious sales target of £2.5bn.

by Elizabeth Anderson
Last Updated: 21 Oct 2014

Internet retailer Asos has reported a 22% plunge in first-half profits, as the expansion of its warehouses and start-up costs in China weighed on the business.

It made a pretax profit of £20.1m in the six months to February 28, down from £25.7m the same time last year.

However, sales for the first half of the year rose 34% to £482m as the firm attracted 2.2 million new customers. In total Asos now has 8.2 million customers, up 36%, and five million of those live outside the UK. Its websites attract 71 million visits per month as more and more people become comfortable with shopping online.

To keep up with demand, the company is planning to invest £68m this year on growing in China, expanding its main UK warehouse in Barnsley, and creating new facilities in Berlin and Shanghai and expansion in Ohio. The retailer has also unveiled an ambitious target to hit £2.5bn of sales 'as the next staging post of our journey.'

'Asos is not and has never been about the short-term; the scale of the global opportunity remains as exciting as ever and we are investing for the many opportunities ahead,' chief executive Nick Robertson said. He's clearly taking a leaf out of Jeff Bezos' book, who continuously says that his plan with Amazon is to think about the long-term and 'lean into the future.' 

Asos, which counts US first lady Michelle Obama as a fan, had warned last month that profits would be hit by the extra investment. Investors were spooked, with shares falling 20% soon after it was announced. However, today they were more bullish, with shares opening up 2.5% to £52.86. 

And analysts at Barclays have predicted they could double in value. On Monday they told clients that shares in Asos, which are already the most expensive on Aim, have the potential to almost double to £100 apiece.

All in all, Asos has had a successful year in terms of its stock price, which is currently trading more than 50% higher on last year.

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