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ASOS sees continued growth but warns of volatility ahead

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ASOS: fashion continues to be an online business
ASOS: fashion continues to be an online business
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ASOS sees continued sales growth as shoppers remain online for fashion, but international shipping and supply could dent future performance

ASOS has reported continuing strong performance, with retail sales growing by 26% in the three months to the end of June, driven largely by an increase of 60% from the UK operation, with active customers growing by another 1.2 million to now stand at 26.1 million.

 

However, the online fashion retailer has warned of turbulence ahead as the pandemic shifts and with higher freight costs and global supply chain issues continuing to add volatility to costs.

 

The retailer remains optimistic, suggesting that it is now certain that shopping habits have changed for good, with more of its key demographic shopping online and likely to continue to do so.

 

Nick Beighton, CEO, says: “Although mindful of the continued impacts of the pandemic on our customers in the short term, we believe that the structure of the global e-commerce fashion market has changed forever, which will drive an increase in online fashion sales over the long term. We’re excited about the size of the prize ahead of us and the opportunity of delivering on our ambition of being the number one destination for fashion-loving 20-somethings.”

 

The news comes just days after ASOS struck a joint venture with US multichannel retailer Nordstrom as it looks to expand Topshop and related brands across North America.

 

The pureplay fashion retailer bought Topshop, Topman, Miss Selfridge and HIIT out of administration in February, following the failure of Arcadia Group. Since then they have been online-only brands.

 

Now it is working with Nordstrom to grow the brands in North America – online and in-store. Nordstrom trades online and through more than 350 shops, and first sold the Topshop brand in the US in 2012. Asos will be Nordstrom’s first retail partner, with an edit of Asos brands going on sale on the Nordstrom website and in a number of its stores. It will also launch Asos click and collect services so that US shopper can collect their online orders in-store at every branch of Nordstrom.

 

Commenting on ASOS’s results, Guy Elliott, Senior Vice President, Retail and Retail Analyst at consultancy Publicis Sapient, says: “ASOS’ results today continue to be impressive – as expected - and demonstrate both the fact that online shopping is very much here to stay and that ASOS is primed to capture a significant share of that trend. Although general social and economic uncertainty remains, over the past quarter, the relaxation of lockdown has seen people keen to go out more, refresh their wardrobes and move away from the home/athleisure wear they’ve been wearing for the past year. With regular promotions and an evolving product offering, ASOS has reacted quickly in giving customers what they want, when they want it."

 

He adds: "While some of that joyful return to clothing shopping has gone back into stores, total retail sales are up significantly (total retail sales in May 2021 were 9.1% higher than Feb 2020 pre-pandemic according to the ONS ) and online has taken the lion’s share of the increase (online clothing sales in May increased 46.6% YoY), ASOS has unsurprisingly been able to capitalise significantly on that growth, announcing a strong trading performance even in continually volatile times."

Elliot believes that the deal with Nordstrom is also highly significant for the retailer. He says: "More interesting is the recent deal they have done with Nordstrom, which gives an indication of the direction ASOS sees for growth in the future, moving beyond online only and giving them physical presence for their brands, in this case Topshop, Topman, Miss Selfridge and HIIT, without the need to create their own physical stores. This move allows them to ‘dip their toe’ in the world of physical retail and test the waters before essentially taking the plunge into a channel that will forever be a critical part of retail."

 

He concludes: "I expect growth to continue into the fourth quarter, however, supply chain pressures and covid uncertainty will remain and will continue to impact – both positively and negatively. Growth will likely come accelerated demand from abroad, particularly in the US and Europe as ASOS continues to invest in these markets.”

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