Apr 10, 2019
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Tough H1 for Asos in France, Germany and US, but Collusion booms and recovery starts

Apr 10, 2019

“Disappointing” was how Asos described its first half as pre-tax profits went into freefall (down 87%). While sales rose 14% for the six months to the end of February, the retail gross margin dropped 60bps.


The market was challenging, but some of its issues in H1 were of its own making. The company is investing heavily in its operations, especially in the EU and US, and such spending has a tendency to take the shine off profits or to add to net debt in the short term, while setting the firm up for long-term growth. Asos also said marketing changes caused a drop in visits to its websites and a fall in its search engine rankings. For a pureplay e-tailer, that’s a disaster.

One problem was multiple customer navigation changes to its websites and its release of 200 local web experiences. This was “strategically the right thing to do,” but had a short-term impact on SEO rankings, although it’s "now seeing early signs of recovery.”

And it said said its opportunity in global online 20-something fashion “remains as attractive as ever and we remain as determined to capture it.” CEO Nick Beighton added: “We believe that ultimately there will only be a handful of companies with truly global scale in this market. We are determined that Asos will be one of them.”


Looking more closely at the figures, pre-tax profits plunged to £4m from almost £30m, due partly to “temporary transition costs.” But some other figures looked better. Group revenues rose 14% to £1.314bn, or 12% currency-neutral (CN). Retail sales rose 13% to £1.281bn (+11% CN). Active customer numbers rose 16%, while order numbers rose 15%. But average basket values were down 2%.

UK retail sales rose 16% to £481.5m. And order growth was 20% from a 4% increase in traffic, with an 11% increase in frequency and a 70bps increase in conversion.

International retail sales were up 12% to £799.8m (+9% CN). EU sales grew 10% (CN), behind target on “weakness in the German and French markets.” But other EU countries rose 22%. 

In the US, CN sales growth was behind plan at 4% (with a Q1 rise of 11% but a Q2 drop of 3%.) As its Atlanta warehouse went fully online in early February, the warehouse just couldn’t cope with demand but it said “US trading is now restabilising.”


The product performance saw ups and downs. For instance, menswear rose only 1% compared to womenswear’s 7% growth. But Asos continued to see “encouraging” performance from its category development with its unisex Collusion line having been its most successful brand launch ever, selling 1.5m units in H1 “and firmly establishing itself as a top 10 brand.” Its full price sell-through was above the group average. Within the UK, Collusion is the most searched brand on Asos. 

Globally, its Face + Body category continued to grow strongly, up 47%, albeit from a low base. It launched 30 new brands, including four from Estée Lauder and has reached annual sales of around £60m, “gaining us traction in a multi-billion-pound market giving us high hopes for both the category and further launches in the future.” 

Asos 4505 continued to perform well within Activewear, with sales up almost 100% compared to H2 2018 having launched in early 2018.

But a few of its categories performed behind its expectations. In womenswear, 'Going Out' was softer than planned and it continued to see a decline in lace and embellished dresses. But performance in day dresses, casual bottoms, skirts and jersey tops was strong, with full-price sell-through up over 25% in some categories. Slower sales of cold weather product reflected the warm winter in Europe.

It added that it’s seeing “strong uplifts” as a result of taking action to strengthen its product ranges, with shorter lead times. And it has some new-to-the-site new brands arriving in H2, such as Opening Ceremony and Margiela MM6. It has also secured a mix of smaller, fresher up-and-coming brands alongside more established brands such as & Other Stories, which will be going live for SS19 and into AW19.

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