Analysts anticipate strong festive trading from ASOS and Boohoo

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Online fashion giants ASOS and Boohoo are expected to reveal further soaring sales growth as shoppers shifted towards their sites amid lockdown restrictions.

The fast fashion retailers both delivered strong growth following the first lockdown in England as shoppers continued to spend money on clothes despite the closure of high street stores.

Investors for the two companies will be keen to find out if this strong sales momentum continued into the key Black Friday and Christmas trading period, with ASOS and Boohoo providing updates on Wednesday 13 January and Thursday 14 January respectively.

Both retailers have tapped into higher demand for loungewear and tailored their ranges to account for fewer parties and smart occasions.

In October, ASOS said its annual profits more than quadrupled to £142.1m for the financial year to August as it benefited from lockdown trends.

It shrugged off soaring costs due to the pandemic by making savings across the group, as it also benefited from reduced returns by customers.

Today, ASOS announced it would invest £90m in a new warehouse in Lichfield, Staffordshire, which will employ 2,000 staff.

Analysts at JP Morgan said the company has seen trading improve after it “significantly strengthened the board” and “addressed mistakes with tangible changes resulting in re-engagement of demand”.

ASOS also raised £247m in funds to help it to manage through the crisis, which JP Morgan said “will leave the balance sheet in a more robust position even as we exit the crisis period”.

Rival Boohoo has reported even more rapid sales growth since the pandemic fully struck the UK last year.

The group upgraded its trading outlook in its previous update in September, saying that it expects revenue growth of between 28% and 32% for the year, surpassing previous forecasts of 25%.

However, fallout regarding allegations of minimum wage failures and poor conditions in its supply chain could continue to take the lustre off its strong trading performance.

Shareholders will be keen to see if further internal improvements have been made and whether its labour problems have had any impact on its popularity.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “We can’t deny improvement is needed, and the share price will be sensitive to any unwanted information.

“On one hand, Boohoo’s core, young demographic is becoming more ethically minded.

“On the other, the group’s low price tags could be enough to tempt swathes of shoppers.”