7th Jul 2015 11:30
LONDON (Alliance News) - ASOS PLC Tuesday reported growth in sales in the first four months of the second half of its financial year in both its UK and international businesses and said that sales for the full year should be at the higher end of its guided growth range, as it raised its pretax profit guidance.
The online fashion retailer said that total retail sales in the four months to June 30 grew 20% on the same period the year before, with UK sales rising 27% and international revenue up 16%, all at actual currency rates. It said that the rise in international sales, which improved on a 1% decline in the comparative period, benefited from price investments which it is making to try to turn that part of the business around.
In the ten months to June 30, total retail sales grew 16%, and rose 27% in the UK and 9% internationally.
Total group revenue, which includes retail sales, delivery receipts and third-party revenue, grew 21% in the four-month period and 17% in the ten months.
Chief Operating Officer Nick Beighton Tuesday told journalists that pretax profit guidance for the full year has increased by 4% to between GBP45 million and GBP47 million, having reported a GBP46.9 million pretax profit in the prior year.
ASOS had previously been seeing its higher-margin overseas markets outperforming the UK, with international sales making up more than half of its total sales in previous years. However that figure had begun to reverse, with UK trading outperforming over the last few quarters, as the strong pound went against the company, pushing up the price of its goods overseas.
ASOS's response was to cut prices overseas generally, and to introduce so-called zonal pricing in Australia, France, Germany, Spain, Italy and the US in order to offer more competitive local pricing and to sell brands previously restricted from those territories.
While zonal pricing had initially hit its gross margin, ASOS said the strategy has proven to boost international sales, adding that retail gross margin in the four months was up around 280 basis points on the prior year.
According to Cantor Fitzgerald analyst Freddie George, this was well ahead of the Bloomberg consensus of a 30 basis points increase.
Back in April, the retailer had said that it expected to improve its gross margin by up to a 100 basis point decline by the end of the year, having reported a 230 basis points decline in the first half of its financial year.
On Tuesday, Beighton told reporters that he expects ASOS's full-year gross margin to be broadly in line with the previous year's 210 basis points decline.
"After accounting for our price investments during the period, the full-year gross margin is nonetheless expected to remain in line with last year, assisted by tighter inventory control and strong full price sales. We anticipate that sales for the full year will be at the higher end of our guided 15-20% growth range. We have increased investment in our people and our customer proposition, particularly in relation to free returns trials. We therefore expect earnings before interest and tax margin to remain at the guided level of around 4%," Chief Executive Nick Robertson said in a statement.
Numis analyst Andrew Wade commented: "While still only 10 months into ASOS' two-year repricing journey, we are seeing clear positive results and a business which has regained its momentum. Despite the strong run in the shares (+50% year-to-date) we retain our positive stance, confident that ASOS has a unique proposition."
Even so, shares in ASOS were trading down 3.1% at 3,731.00 pence Tuesday afternoon.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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