Wednesday, 15 July 2020

Asos has good Q1 despite lockdowns, can now pay back furlough grants



Asos offered further evidence of the strength of online operators on Wednesday when it said the four months to June 30 (P3) saw retail sales rising 10% to £983.3 million. That was less than the 17% rise in the 10 months to the same date, but covering a period of unprecedented economic disruption, it was a strong result.

The fashion e-tail giant said that UK retail sales dipped 1% to £329.1 million and the US was down 2% to £124,9 million. But the EU rose 20% to £328 million and the Rest of the World unit rose 19% to £201.2 million. Overall, international retail sales rose by 15%.

During the period, the company was hampered by social distancing protocols as it kept working through the lockdown, but it clearly coped reasonably well. And it said it saw “a steady improvement throughout the period, reflecting increasing warehouse capacity, underlying improvement in demand and a beneficial returns profile”.

Yet while volume growth was 15%, the average selling price was down, hurt “by lockdown product mix and limited demand for occasion wear”. The business had adapted fast to refocus its product mix, but growth in popular lockdown categories was “held back by availability given health and safety measures implemented across our product supply chain”. 

However, in those circumstances, and given the enormous hit to consumer confidence that the pandemic delivered, that 1% fall in UK retail sales looked like a good result. And it saw its active customer base increasing to 23 million, up 16% year on year, “with particularly strong growth in new international customers”.

Also, good news is the more recent recovery in the EU and ROW reflecting lockdown easing in key countries. 

And while the firm said its gross margin fell 70bps, it talked of “improved profitability and cash generation”. That should help it do the right thing and avoid some of the criticism that has headed the way of some companies. As its business gets back on track, the company said its previously claimed furlough support from the UK government is “to be repaid".

CAUTIOUS OUTLOOK

So what does it expect for the future? “Against the backdrop of continued social distancing, ongoing restrictions of events and an uncertain economic outlook for our 20-something customers, we remain cautious on the short-to-medium-term outlook on-demand,” it explained.

But FY20 pre-tax profit should be “towards the top end of market expectations”.

CEO Nick Beighton said it's "been a tough time for all businesses, but we have remained focused on doing the right thing for our people and our customers and making sure that we emerge from the current crisis as a stronger and better organization. 

“Our performance in P3 shows that we are delivering against this aim despite the tough economic and social backdrop. We have learned a lot and adapted quickly. While we remain cautious about the consumer impact of Covid-19 looking forward, we are on track to deliver strong year-on-year profit growth and to return to positive free-cash-flow for the full year.”

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