ASOS quarterly sales up 13% but growth held back by tough Christmas and US disruption
Online fashion giant ASOS posted a 13% increase in sales in the three months to 28 February and said it was holding its guidance of 15% for the full year. However its growth was held back by competitive Christmas trading and disruption in its US business.
During the period the London-based business achieved sales of £396m. UK sales were up 14% at £244.4m but US sales were held back while its new Atlanta warehouse came online. Sales in the US were up just 4% at £76.6m but ASOS said a backlog in orders had now been cleared and sales are now regaining momentum.
In the EU sales were up 12% to £198.4m while the rest of world put in a strong performance up 20% at £121.9m.
Chief executive Nick Beighton said: "Group sales over the period increased by 13% and retail gross margin improved by 40bps. We continued to outperform in the UK with sales growth of 14%. Sales in Europe were up 12%, although France and Germany, our two largest markets, continue to be challenging.
"Our retail gross margin guidance for the year remains. We will be increasing investment in price and marketing in the second half, particularly in France and Germany. Given the actions we are taking together with an improving US performance, we believe the Group will deliver stronger growth in the second half. Consequently we remain confident that we will meet guidance for the full year."
During the quarter, active customers increased by 16% but the average selling price and average basket size both fell 1%, and order frequency was down 4%.
Ed Monk, associate director from Fidelity Personal Investing’s share dealing service, said: “ASOS’ festive wardrobe malfunction was confirmed today with sales growth in the six months to March rising 11% on a constant currency basis, reflecting the worse trading flagged in its December profit warning.
“Six months ago ASOS seemed to be defying gravity in the retail sector with ever-rising sales despite the gloom on the high street, but the December warning brought it back to earth with a bump. ASOS was outflanked by heavy, sector-wide discounting over Black Friday sales in November and has to make up ground with deep price cuts of its own, hitting profits.”
Fiona Cincotta, senior market analyst at www.cityindex.co.uk said:: "While this update is not nearly as disappointing as December's dreadful downgrade, it's a reminder that ASOS still faces its fair share of demand and execution challenges.
"Sales growth has slowed in the UK compared to the first quarter, indicating once again that online retailers aren't necessarily immune from the broader slump in consumer confidence caused by Brexit jitters.
"Problems meeting demand in the US demonstrate the execution risks faced by Asos as it attempts to expand its platform worldwide.
"Management is right when the say the demand surge in the US is a silver lining, but that demand won't linger for long if the company keeps failing to deliver."