Asos international performance boosts record FY earnings
FY earnings jump 163% to reach GBP64.1m (US$85m)
Gross margin narrows 20 bps
Group revenues grow 33% to GBP1.9bn
UK-based online fashion retailer Asos has increased its forecast for the year ahead on what it called "record" sales and profit figures for 2017.
For the year to the end of August, earnings jumped 163% to reach GBP64.1m (US$85m) from GBP24.4m a year earlier, after exceptional items, while group pre-tax profit spiked 145% to GBP80m from GBP32.7m. Gross margin narrowed 20 basis points to 49.8% from 50%.
Group sales reached GBP1.9bn, a 33% increase from GBP1.4bn in the year-ago period, while retail sales were up 34% to GBP1.9m on a reported basis, once again driven by strong product, proposition improvements and further price investments across major markets. As previously noted, Asos said the continuing foreign exchange tailwind enabled reinvestment at a faster rate than initially planned.
Its international arm was the biggest contributor, with a sales rise of 47% to GBP1.18bn, aided by the reinvestment of the foreign exchange tailwind, while its UK retail division grew sales by 16% to GBP698.2m.
"It's been a great year for Asos, with continued growth in sales and profits," said CEO Nick Beighton. "Our international performance was excellent, as we reinvested foreign exchange tailwinds and benefitted from our continually improving customer proposition. In a competitive UK market, we achieved strong full price performance whilst further increasing market share.
"At the same time, we ramped up our investment in building the increasingly strong and differentiated Asos proposition. Our new agile technology platform is allowing us to accelerate our pace of innovation with great benefits for our customers, including new payment methods and additional language sites to come."
Beighton adds the investments the retailer is making will see it add 1,000 new heads and will lay the foundations for a 60% increase in unit capacity and GBP4bn of net sales.
Looking ahead, Asos said the new financial year has "started well", and it now expects full-year sales growth of between 25% and 30%. Medium-term sales guidance remains unchanged at 20-25%.
"The new financial year shows continuing momentum in the business," Beighton adds. "The potential for our company remains huge. We are confident we are positioning Asos to be the world's number one destination for fashion-loving twentysomethings."
Sofie Willmott, senior retail analyst at GlobalData, notes the online retailer continues to innovate at a rapid pace and its dream to be the number one global fashion destination online for twenty-somethings draws closer to coming true.
"Though UK sales have slowed as the online pureplay matures, Asos still stands out in the crowded online clothing and footwear market, confidently outperforming its high street competitors like New Look and Arcadia which are struggling to drive sales above last year."
Meanwhile, Wilmott adds its exposure to international markets has protected it from the impact of rising supply chain costs in the UK following the fall in the value of the pound in 2016.
"With FY2017/18 sales guidance now set at 25-30%, Asos will be further relying on international countries to drive growth where its proposition is not yet developed to the same level as the UK. Growth in the UK will be harder to achieve, although new initiatives like Asos Instant (same day delivery in London, due to be rolled out to other UK cities) demonstrate the retailer's willingness to take risks to capture consumer spend."