Asos, an online fashion retailer, reported a 329% increase in yearly profits after their sales held up as a result of high demand for casual clothing and sportswear during the lockdown. The sales were up for 2020 but their shares dropped on the firm’s cautious outlook as users switched to cheaper ‘loungewear.’
Revenues increased by 19% for the year to the end of August. That is a slight slowdown compared to the 21% growth in the first half of the year. The smart and ‘going out’ clothes became harder to shift.
The group encountered higher costs to implement safety measures at warehouses but saved money as more deliberate buying behavior from consumers meant fewer items were returned.
It increased by up to a £45m boost to the business’s bottom line. That helped pre-tax profits grow to £142m compared to £33m a year earlier. Asos said that its consumer base grew by 3.1 million to 23.4 million including 7.1 million in the United Kingdom.
However, the company said that its ‘average basket value’ of purchases, while up 1% for the year, declined in the second half of the year as:
“customers mixed into lower ASP [average selling price] product categories such as loungewear”
Nick Beighton, the Chief executive, cautioned:
“life for our 20-something customers is unlikely to return to normal for quite some time amid the pandemic”
Shares fell 7%
Asos had acknowledged slowing growth over the summer of this year, and in its latest statement it said that trading since the end of June 2020 had been solid but with “continued reduced demand for occasion wear”. The firm said that during the year, the pandemic had hit supply chains and caused a “dramatic shift in consumer demand”. Asos added:
“Whilst demand for certain types of product, particular occasion, and formal-wear, remained constrained, we saw strong growth in casualwear and other lockdown relevant products.”
The company said that the market for the ‘going out’ clothes had been heavily impacted by lifestyle restrictions. Nonetheless, it has expanded its casual wear offering to adapt to the “shift in 20-something lifestyle”.
Asos’ sales of sportswear, driven by lockdown demand, grew by 50%. A senior investment analyst at Hargreaves Lansdown, Susannah Streeter, described the results as “impressive”. But she added:
“A depressed economic outlook may push down demand to refresh wardrobes. With venues forced to close at 10 pm and the Christmas party season canceled, profits from party wear will be thin. Job prospects are uncertain for its core group of customers in their 20s and so the company will have to be very choosy about the ranges and prices it offers to maintain demand and stop returns being a major headache once again.”
In July, Asos said that it would repay £1.8m claimed directly from the government furlough schemes.