ASOS sales up 13% in "pivotal" year but profits hit
UPDATED: ASOS has posted sales up 13% to £2.73bn in what CEO Nick Beighton has described as a "pivotal" year for the young fashion etail giant.
Retail sales were also up 13%, to £2.66bn, in the year ending 31 August 2019 but, as expected, profits slumped 68% due to heavy investment, restructuring costs and disruption caused by the onboarding of new warehouses in Germany and the US. Profit before tax dropped from £102m last year to £33.1m.
UK sales grew by 15% to almost £1bn (£993.4m), EU sales were up 12%, the US was up 9% and the rest of the world 12%. A total of 72.3m orders were placed during the period, up 14%.
CEO Nick Beighton said: "This financial year was a pivotal period for ASOS, where we have invested significantly and enhanced our global platform capability to drive our future growth. Regrettably this was more disruptive than we originally anticipated. However, having identified the root causes of our operational issues, we have made substantial progress over the last few months in resolving them. Whilst there remains lots of work to be done to get the business back on track, we are now in a more positive position to start the new financial year.
"Our focus now shifts to ensuring that we enhance our capability to drive an improved customer experience and leverage the benefits from the investments we have made. With over 60% of our revenue coming from international customers and a strong global logistics platform with capacity to grow, we are well positioned to take advantage of the global growth opportunity ahead of us."
ASOS said it spent £221.6 million in the year upgrading and improving its infrastructure, leading to debts of £90.5 million, compared with £42.7 million in cash at the same point last year.
The main issues were focused on getting its new Eurohub in Germany up and running. Management insist these are now resolved and problems with stock availability in the US are almost sorted.
In its statement the company said: “With the benefit of hindsight, we were not adequately prepared for the additional complexities of planning and trading across our expanded warehouse footprint.”
As a result, the gross profit margin was down 2.5% and there were more promotions, although Beighton suggested this was in reaction to the warehouse and supply problems and may not be long term.
Other fixes include improving its social media engagement with customers and trying to tap into the next generation of young shoppers.
The company said the launch of the Collusion brand, aimed at Gen Z shoppers, was a success, winning new customers in the 16 to 24 age bracket, which its the heartland demographic of its smaller rival Boohoo.
Boohoo has raced ahead in the last year, overtaking ASOS in market capitalisation (though it is still much smaller with sales of £1bn over the past 12 months) and snapping up brands including Karen Millen and Coast, keeping them as separate entities.
Beighton said he had no plans for ASOS to start hosting brands on separate websites, adding: “ASOS has always been a multi-brand offer and believe it is the most compelling way to reach our customers.”
Despite the positive notes and eye on the future, the chief executive warned: “I think there is a very unsettled customer environmental out there. There is an awful lot of global uncertainty for the consumer.”
Shareholders reacted positively to the statement with shares up 13% in early trading to 2,899p.
Steve Miley, a senior market analyst at www.asktraders.com commented: "ASOS will be pleased to put the last financial year behind it. After a troublesome year of warehouse automation issues, restructuring costs and a challenging trading environment, ASOS posted an eye watering 68% slump in full year profits.
"Times are changing and the online retailer is struggling to keep up. It now has significantly stronger competition in the likes of Boohoo and Next to contend with. However, after a year of heavy investment and restructuring costs, it should be in a better position to take on the challenges of the year ahead. Shares have dropped over 50% across the past year from a high of £50 just 12 months ago to £25.60 at yesterday’s close."
