Sales rise but profits fall at Asos after a year of challenges

Asos today reported profits down by 14% after a year in which a warehouse fire, the cost of expansion into China and the strength of the pound all tested the business.

Sales of £975.4m were up by 27% in the year to August 31, compared to the previous year, but pre-tax profits fell by 14% to £46.9m over the same period. The company missed its £1bn sales target for the year as a result of sales lost when the warehouse closed for two days as a result of a fire in June, but its chief executive Nick Robertson (pictured) said his sights were now firmly on the next target, of £2.5bn.

“We are in a period of major investment that comes at a short-term cost but the medium-term benefits will be significant,” said Robertson. “As a result we’ve had to manage a number of factors including disruption from significant investment in our warehousing, the launch of our new business in China, the strengthening of the pound and the fire at our Barnsley warehouse in June, all of which combined to reduce profits by 14% to £46.9m.

“Asos has always been about the longer journey to a very big prize: to be the world’s leading fashion destination for 20-somethings and we are very firmly focused on our next staging post of £2.5bn sales.”

China remains a key focus for Asos’ global expansion. During the year it invested £8.6m and has launched on T-mall during the year in a bid to increase brand awareness and market share. “We continue to learn lessons from the China market,” said Asos, “and are confident that we will deliver a profitable operation in this territory over the medium-term.”

The company said customer engagement grew during the year: by year end it had 8.8m active customers, 25% more than at the same time last year. Website features launched for customers during the year included an Asos personal stylist function, where customers can get advice over live chat. Search and recommendations were also improved during the year.

Over the next two years the company plans to invest £75m on technology including a “major replatforming” that, said Asos in its results statement, “will bring significant long-term benefits to the business.”

The company said investment would be focused on ensuring best-in-class customer experience in its strategic markets while at the same time ensuring that platforms had “the capacity, capability and resilience to deliver our global growth targets.” Localised apps, for example, were launched in Australia and the US during the year, to be followed by France, Germany, Italy, Spain and Russia over the next six months. Asos will also launch zonal pricing in a number of territories before Christmas.