• Retail Dive

Asos proves fast fashion isn't cheap, sees 'huge' growth ahead

Dive Brief:

  • U.K. fast-fashion retailer Asos on Tuesday announced that sales this year through August rose 34% on a reported basis and 27% on a constant currency basis, with solid growth in its U.K. home base of 16% and a 36% increase internationally (or 47% on a constant currency basis) and said the potential for the company’s continued growth "remains huge."

  • Asos gross margin in the period was up 10 basis points over the prior year despite promotions, the company said in a press release. Asos reports continued strong customer engagement with active customers up 24%, average basket value up 2% and average order frequency up 5%, the company said. Total orders shipping in the period rose 30% over the same period last year to 49.6 million.

  • The e-commerce apparel retailer said it expects a fiscal 2018 sales rise of between 25% to 30% and capital expenditures to reach £200 million to £220 million. The company enjoys a "strong cash position" of £160.3 million to support growth and enable business investment.

Dive Insight:

Consumers, especially younger shoppers in the U.S., appear to favor physical stores when it comes to apparel sales, and for a long time that led fast fashion retailers like H&M to avoid building much of an e-commerce operation. Brands such as H&M, TopShop and Forever 21 dominate the U.S. market, but pure-play digital retailer Asos, which enjoys loyalty among younger shoppers, is proving the potential for apparel sales online.

The retailer on Tuesday crowed about its investment in technology, saying that a new tech platform is allowing the company to accelerate its pace of innovation, including new payment methods and additional language sites that are still being developed. "The investments we are making will see us add 1,000 new heads and will lay the foundations for a [approximate] 60% increase in unit capacity and [approximate] £4 billion of net sales," according to its press release.

"It's been a great year for Asos, with continued growth in sales and profits. Our international performance was excellent, as we reinvested FX tailwinds and benefited from our continually improving customer proposition," Asos CEO Nick Beighton said in a statement. "In a competitive U.K. market, we achieved strong full price performance whilst further increasing market share."

The retailer’s tech prowess was also hailed by GlobalData Retail senior analyst Sofie Willmott, who noted younger consumers’ willingness to buy clothes online. “Our e-retail report shows online shopper penetration for 16 to 34 year olds above 90%, affirming the importance of the online channel for younger consumers," she said in an email to Retail Dive. "Online pure-plays including Amazon and Asos continue to innovate introducing new technology and driving up consumer expectations of delivery and user experience, requiring multi-channel players to quickly follow suit to maintain their relevance."

While Asos’s prices are competitive, the company is also demonstrating an ability to keep discounts to a minimum, according to research from retail analytics company Edited emailed to Retail Dive. Asos charges more on average than its fast-fashion rivals per any item in women’s and menswear, with an average price of $57.16 compared to $29.68 at H&M and $24.15 at Forever 21, Edited found. While 71% of Asos’ products are less than $50, that compares to 93% at H&M and 95% at Forever 21, that research found.

"Based on our analysis, it's clear the fast fashion is not synonymous with low prices, nor is it a winning strategy," Edited's Senior Retail Analyst Katie Smith said in an email to Retail Dive. "Asos is a clear example of a brand that’s tapping into the right data and insights to hone its pricing, discounting and assortment approach to win over the consumer."

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