18th Mar 2014 09:02
LONDON (Alliance News) - Online fashion retailer ASOS PLC Tuesday said strong sales growth continued over the past few months, pushing total retail sales up 34% in the first half of the year, and said it is still confident in achieving GBP1 billion in sales this year, but warned that an increase in investment will cut into its profit margin.
The popular 20-something online clothing and beauty retailer said sales from outside the UK continue to increase, now representing 65% of total sales. It said that active customers were up 36% year-on-year, with a total of 8.2 million active customers at February 28.
However the retailer warned that it will now spend more on investment this year than originally expected, on warehousing in the UK and Germany, as well as on starting up distribution in China, which will hit its earnings before interest and tax margin.
Shares in ASOS dropped 16% Tuesday morning to 5,317.00 pence, making them one of the biggest decliners on AIM where ASOS is the largest stock.
"This investment, as well as the investment in our China start-up, will reduce our EBIT margin for the current financial year to 31 August 2014 to around 6.5%," said Chief Executive Officer Nick Robertson in a statement.
ASOS said that this year these costs will be disproportionately borne in the first half, resulting in a likely first half/second half of the year's pretax profit split of approximately 30%/70%.
With a short two-month second quarter, analysts were expecting sales to trend back, particularly in the UK.
For the two months to February 28, the retailer reported retail sales growth of 26% to GBP136.7 million, driven by a 57% increase in sales EU retail sales, and a 41% sales increase in the US. It reported international sales growth of 29%, and growth of 21% in the UK.
"Retail sales for the two months to February were strong in all territories except Rest of World where we experienced adverse currency movements, notably in Australia and Russia," Robertson said.
ASOS said that for the six months to February 28, total retail sales rose 34% to GBP472.3 million, up from GBP352.3 million a year earlier. For the six month period it said total international sales grew by 35% to GBP290.3 million, driven by a 65% rise in EU retail sales, largely from stand-out trading in Germany and France, while UK retail sales in the first half grew by 32% to GBP182.0 million.
In the two month period its retail gross margin was down 30 basis points on the prior year, but was up 60 basis points in the first half of the year.
The group said it will now spend more on investments this year than originally expected.
ASOS said that it will now invest at least GBP68 million in capital expenditure in the current year, compared with its previous guidance of GBP55 million, as it has accelerated investment in its warehousing in the UK and Germany, as well as in IT.
"This investment will increase our sales capacity to around GBP2.5 billion per annum, over GBP1 billion higher than previous guidance," said Robertson.
Robertson said the group's investment in warehousing will ease from the second half of the year onward.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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