Asos sees Pandemic Boost Sales and Profit

Online fashion retailer Asos sees the pandemic boost their sales and profit. Expectations were surpassed as their young consumer base coped with being stuck inside at home.

According to chief executive Nick Beighton, the core market of 20-something year olds usually bought going out clothes. The company made a quick change to pushing casual clothing, which clearly paid off. Sales, profits and customer numbers surged.

Over the past six months, Asos added one and a half million customers, giving a total of 24.9 million. They have more than seven million customers here in the UK.

In the six months leading to 28 February, sales rose by 24%. Sales were particularly strong in the UK and climbed by 39%.

Profits jumped to £106.4m, up from £30.1m in the year before.

During lockdown, a change was made to put more emphasis on casual wear, activewear and beauty products. This quick shift met the growing demand in those areas. Popular items included jersey tops and casual bottoms.

As lockdown restrictions ease, Mr Beighton expects the popularity of occasion wear will rise back up again. This is likely to begin with daywear, and followed by evening wear. It is vital that Asos remain flexible during the transitions.

E-Commerce Growth

In February, Asos purchased Arcadia brands Topshop, Topman, Miss Selfridge and HIIT in a £295m deal. The company hopes that the integration of these new labels will help continue their progression as planned. The intention is to continue selling the brands online only as the network of physical stores was not part of the deal.

Asos is one of the few retailers that have benefited during lockdown, as the company trade only online.

E-commerce in general has been growing over time, and is here to stay. However, at the moment there is still a place for offline stores too.

Mr Beighton is confident that Asos have built up enough momentum to continue drive to be the top destination for fashion loving 20 somethings. Although he is still aware there is some short-term uncertainty. It is unclear what the economic consequences of the continuing pandemic will be for its youthful target market.

The possibility of further Covid waves and the global timetable for easing restrictions still pose a risk. However, the company is “well positioned to capture demand for event-led product when lifestyles normalise”.

Beating Expectations

Asos has beaten analysts’ expectations on profits. The business is in great shape, in terms of cashflow, and the integration of newly acquired brands is yet to be fully reflected in their performance.

Asos are in a very strong position at the moment. They have great geographical diversification and over the last year or so have invested in customer fulfilment. This is reflected by its share price increasing more than 400% since the start of the pandemic.

The company is also seeing fewer customer returns while coronavirus restrictions are ongoing. This has given the business a £48.5m boost as additional warehouse and distribution costs are lower than expected.

There is a danger that once the pandemic and restrictions end, the resurgence of occasion wear and going out clothes will bring more returns as customers return to their old ways.

As we move nearer to a post-pandemic world, Asos will be ready for increased demand for its more dressy and formal wear ranges. Although it is likely that the desire for more comfortable and versatile clothing will remain for the long term.

Therefore, Asos need to ensure these styles still have a high presence on social media platforms, and that it shows how items can be styled to suit different uses.

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