13th Aug 2020 11:47
(Correcting expected financial 2020 pretax profit.)
(Alliance News) - ASOS PLC on Wednesday said its annual sales and profit are likely to be "significantly ahead of market expectations" as customer returns did not increase as fast as expected.
The online-only clothing retailer's revenue growth is now expected to be between 17% and 19%, with pretax profit in the region of GBP130 million to GBP150 million. In its financial year ended August 2019, ASOS reported pretax profit of GBP33.1 million on GBP2.73 billion in revenue.
Assuming a 19% increase in revenue, that would mean revenue of GBP3.25 billion for financial 2020.
Higher expectations are driven by better than expected underlying demand amid the lockdown, with more people shopping at home, as well as continuation of its "beneficial returns profile".
The company had expected to see underlying returns normalise when lockdown measures eased and it became easier to ship returns, but with "better visibility on this pattern in customer behaviour" it has become clear that returns are not increasing at the rate ASOS had originally expected.
This lower rate of returns stems, in part, from customer demand for 'lockdown' clothing categories like activewear. Rates are also below estimates thanks to "a prolonged shift in customer behaviour towards more deliberate purchasing across all product categories, even when sales momentum has improved."
ASOS said: "Looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist. We are providing updated expectations for the current year reflective of this uncertainty. The recent trading dynamics will deliver FY20 sales and [pretax profit] ahead of market expectations and further support strong underlying cash generation this year. However, the extent of this outperformance and any impact beyond this financial year will be driven by how customer shopping behaviour normalises."
The company noted that the second half of its year "has been a period of tremendous change" and it is exiting financial 2020 "in a strong position".
By Anna Farley; [email protected]
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