2nd Apr 2014 07:23
LONDON (Alliance News) - Online fashion retailer ASOS PLC Wednesday reported a drop in profits for the first half of the year, as it invested in doubling its sales capacity.
However, sales growth remained strong at the popular online clothing and accessories retailer, with retail sales in the first half rising by 34%.
ASOS is pumping a large amount of money into its infrastructure, especially into IT and warehousing, which Chief Executive Officer Nick Robertson says is costly but necessary for future growth.
"Our GBP68 million investment during the current year will more than double the sales capacity with greatly enhanced efficiencies at our UK warehouse, a new Eurohub in Berlin, an expanded facility in Ohio in the US and a new warehouse in Shanghai," Robertson said.
ASOS's decision to push the accelerator on its investments this year, took investors and analysts by surprise last month, when it said in a trading update that its margins this year would be hit by increased investment costs on warehousing in the UK and Germany, and on its start-up in China.
It also said that it was expecting around 30% of full-year profit to be generated in the first half, with the remaining 70% in the second half of the year.
ASOS reported Wednesday a pretax profit of GBP20.1 million for the six months ended February 28, down 22% when compared with the GBP25.7 million reported a year earlier.
"This increased pace of investment has reduced our profitability in the period, but will deliver significantly increased capacity as well as efficiencies in the longer term. ASOS is not and has never been about the short-term; the scale of the global opportunity remains as exciting as ever and we are investing for the many opportunities ahead," said Robertson.
On the sales front, ASOS continues to perform strongly, particularly outside of the UK, reporting 35% growth in international retail sales in the first half to GBP290.3 million, with a 32% rise in UK retail sales to GBP182.0 million. The retailer said that international retail sales currently account for 61% of total retail sales.
Overall, retail sales in the first half rose 34% to GBP472.3 million, up from GBP352.3 million the prior year, boosted by a 36% increase in active customers, totalling 8.2 million at February 28.
ASOS said that its fastest growing segment in the first half was the EU, driven by particularly strong growth in France and Germany, while its UK performance was boosted by a strong peak Christmas trading period, and it grew its market shares in the US.
However the retailer said that Australia was hit by adverse currency fluctuations throughout the period, while Russia held up fairly well despite forex headwinds, following improvements to its delivery proposition and targeted digital marketing activities.
Although ASOS said its margins this year would be hit by an acceleration in investment, the retailer said its retail gross margin increased by 60 basis points to 49.5% in the first-half of the year, up from 48.9%.
ASOS currently tailors the mix of own-label, global and local brands sold through nine local language websites: UK, US, France, Germany, Spain, Italy, Australia, Russia and most recently China.
ASOS shares were up 0.7% at 5,192.00 pence per share at the open Wednesday.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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