Asos’ sales growth held back by competitive Christmas trading and US disruption

Asos continued to grow sales at home and abroad in the second quarter, but was held back by competitive Christmas trading and disruption in its US business.

By The Newsroom
Tuesday, 19 March, 2019, 08:30
Asos has a distribution centre near Barnsley Photo: Rui Vieira/PA Wire

The fast fashion retailer said total retail sales for the three months to February 28 were 11% higher at £641.3 million.

This included double-digit growth in the UK, which remains the group’s largest market with 14% sales growth to £244.4 million.

EU retail sales were 8% higher, while rest of world jumped 21%.

But delays in US shipping pushed sales in the region down by 3%.

Chief executive Nick Beighton said: “As our Atlanta warehouse went fully online, demand far exceeded our expectations. Whilst very encouraging for the longer term, this caused a significant short-term despatch back log which we have now cleared.”

In December, the company warned that profits were likely to be lower than expected due to a significant deterioration in trading during the lead-up to Christmas.

The announcement indicated that the company was not immune from the cyclical slowdown, caused in part by the disruptive effect of Black Friday on the usual retail calendar.

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Overall sales for the six months to February 28 were up 11%.

The group reiterated its guidance for 15% sales growth for the full year.

Mr Beighton added: “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.”