Profits at Asos more than quadrupled as young shoppers stocked up on stay-at-home outfits during lockdown.
The online retailer posted pre-tax profits of £142 million for the year to August 31 compared to £33.1 million in 2019. The figure is £10 million higher than analyst consensus; the City had doubled its forecasts in August after Asos issued a bullish profit upgrade.
More than three million new customers bought clothes from Asos during the year, taking its total customer number to 23.4 million and driving sales 19 per cent higher to £3.26 billion during the year.
The retailer said that it had had a “solid start” to the new financial year, with its warehouse capacity operating at normal levels, but it remained cautious about the outlook for consumer demand “whilst economic prospects and lifestyles of twentysomethings remain disrupted”.
Asos is now valued at £5.37 billion — almost three times the market value of Marks & Spencer — having risen by 37 per cent since the start of the year. The Aim-listed company was founded in 2000 as As Seen on Screen by Nick Roberston, grandson of the founder of the Austin Reed fashion label. Its growth has soared on the back of the fast-fashion trend and its core customer base of shoppers aged 18 to 30 abandoning the high street in favour of online.
The shares were trading higher first thing this morning before dropping 6.6 per cent, or 354p, to £50.24 in early trading. This is still three times higher than the price at which Asos issued shares in April in a £247 million placing to cushion the balance sheet from the impact of coronavirus. The directors who also took part in the placing, including Nick Beighton, chief executive are sitting on a combined paper profit of £1.5 million, while non-participating retail shareholders had their stakes diluted.
The strong results from Asos shows the online retailer has fully recovered from a tumultuous 2019 when major IT problems at its overseas warehouses knocked its sales growth off course leading to two profit warnings.
“After a record first half which saw us make progress in addressing the performance issues of the previous financial year, the second half will always be defined by our response to Covid-19,” Nick Beighton, chief executive of Asos said. “As well as protecting staff, suppliers and customers, we’ve driven efficiency and have emerged a stronger, more resilient and agile business whilst delivering strong profit and cash generation.”
Asos said that its profits had a £45 million tailwind from covid-19, largely due to a significant drop in its customer returns rate as lockdown dramatically changed shopping habits. Returns had been problematic in the past for Asos, with around 40 per cent of goods sent back. However, because weddings, festivals and other sociable gatherings haven’t been taking place during the pandemic, shoppers have not been buying multiple party dresses for an occasion, knowing that they will only keep the one they like best. Instead, Asos has been selling much more casual clothes, with sales of sportswear rising by 50 per cent, and shoppers have been much more deliberate with what they are spending their money on.
