Asos upgrades outlook as sales soar, returns stay low

By

Sandra Halliday

Published
Aug 12, 2020

Wednesday brought a rare piece of good news from UK fashion retail as Asos said it has “continued to deliver a strong operational performance and year-on-year improvements in profitability” in this financial year. This is “as a result of a focus on trading dynamically and managing the business rigorously”.

But importantly too, the improvement in expectations is supported by “stronger than anticipated underlying demand and the continuation of the beneficial returns profile highlighted in our last trading statement,” it said.

The company had been expecting to see underlying returns normalising once lockdown measures eased and shoppers were both able to ship returns and felt more comfortable doing so. “However, in recent weeks, we have gained better visibility on this pattern in customer behaviour as we have progressed through the returns cycle and it has become evident that returns are not increasing at the rate we originally anticipated,” it said. It means the returns rate has been lower since April and remains that way. 

So why is this happening? "In part this reflects customer demand for ‘lockdown’ categories, such as activewear and face + body," the company explained. “However, rates have been further suppressed below estimated levels by a prolonged shift in customer behaviour towards more deliberate purchasing across all product categories, even when sales momentum has improved”.

It all means the firm has upgraded its outlook and said sales and profit for the full year “are expected to be significantly ahead of market expectations”.

It’s now predicting this year’s revenue growth at between 17% and 19%, with pre-tax profit to be anywhere from £130 million to £150 million. 

That said, the company admitted that the “consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist”.

Its updated expectations for the current year are "reflective of this uncertainty”. The extent of its current outperformance and any impact beyond this financial year “will be driven by how customer shopping behaviour normalises”.