Jul 12, 2018
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World still loves Asos as SS18 proves strong and trading stays buoyant in July

Jul 12, 2018

A report earlier this week showed that US shoppers like to buy from UK websites, especially when it comes to fashion. And on Thursday it seemed that Asos has benefited from this trend as the US proved to be one of its strongest growth markets.

Asos is driving customer numbers higher

But clearly, consumers from the rest of the world also rate its offer highly as the company’s latest trading update showed that it's been firing on all cylinders internationally during the spring and early summer season, the four months to June 30.

And importantly, it said that the new period’s trading “has started well, particularly in terms of full-price sell-through” so July's heatwave in some of its most important markets doesn't appear to have had the negative impact it has had on some retailers.

In a market that’s tough, to say the least, in many countries, the winning Asos formula continued to power it forward in the period from March to June with the result that retail sales rose 22% in total, or 21% on a constant currency basis (CCY). 

Admittedly, that's a slight slowdown from the figures for the 10 months to June 30, but not enough of a slowdown to prove worrying. In the 10-month period reported sales were up 25%, while they rose 23% CCY.

A deeper dive into those numbers shows just how well the pureplay fashion (and now also also beauty) e-tailer is doing globally. Its UK retail sales rose 23% to reach £288 million and it's interesting that this is actually an acceleration from the 10-month figure that was up 22%.

Meanwhile, retail sales to the EU powered head by 31% to £257.4 million in total. And while the CCY increase was slower, at 23% it was hardly anything to fret about. The increase in the US may have ‘only’ been 15% to hit total sales of £108.1 million, but on a CCY basis, growth was a storming 22%. And Asos’s Rest of the World (RoW) region underlined the business’s wide appeal. Sales there rose 11% (both reported and CCY) to reach £149.2 million. That all added up to a 21% total increase in international sales and a 19% one on a CCY basis.

There were plenty of other positive figures too that would be the envy of many retail peers, including active customer numbers up 20%, average basket value up 1%, average order frequency up 8% and conversion rising 10bps. 

Asos had a strong early summer season

While currency headwinds were obviously a depressive factor during the period, we can see very clearly that what Asos has to sell and the way it sells it is resonating with consumers around the world. It continued to gain share in its domestic UK market in the SS18 season and it said that the international sales growth came “as infrastructure and proposition investments continue,” which sets it up for further profitable growth in the future.

And profit really is key here. Its strong sales should all feed through into equally strong profits as the company said that its retail gross margin was up 130bps, which is ahead of plan.

The company did sound a note of caution by saying that its full-year sales would most likely be towards the lower end of its guidance of a rise between 25% and 30% but, as mentioned, that's hardly the sign of a business in trouble. The company guided that pre-tax profit should be in line with analyst expectations and the gross margin is set to rise around 100bps. And the firm also stuck to its medium-term sales guidance of turnover arising between 20% and 25% annually.

So what did CEO Nick Beighton have to say about all this? He said he was “pleased” with the way the business has traded over the last four months and that “we are on track with our plans for the year,” which sounds quite understated in the circumstances. He added that “we delivered good sales growth, particularly in the UK, [and] better than planned gross margin alongside significant progress on our infrastructure investments.” So nothing to complain about there then.

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