Retailer Asos shares rise

Online Fashion retailer Asos reported an 87% drop in first-half pretax profit, hurt by poor trading in the run-up to Christmas and logistical hiccups in the US market. Yet the company, whose affordable on-trend garments have made it a hit with young buyers stuck to its guidance for sales, profit margins and capital expenditure for the full year.

Shares in the company were boosted by the reassurance and rose 7.5% though still well below their level before a shock profit warning in mid-December.

Asos was one of the first purely online clothing retailers in the UK. but it is now facing cut-throat competition from new players like Boohoo and Missguided, targeting teens who shop with their phones and share fashion shots on social media.

Changing consumer habits have led to heavy discounting in the fashion sector as shoppers use the internet to compare prices. Meanwhile, uncertainty over Britain’s exit from the EU has dampened consumer demand in Asos’s domestic market, which accounts for around one third of sales.

Chief executive Nick Beighton told analysts at a presentation:

It’s certainly been a challenging six months and one of the most challenging we’ve seen in many years.

“Economic uncertainty has undermined consumer confidence and during the period we saw exceptional levels of discounting,” he said.

In addition to wider sector problems, Asos’s new US warehouse struggled to cope with demand, adding to challenges in France and Germany where sales were weak. The US accounts for around 12% of sales.

“Asos is capable of a lot more,” said Mr Beighton. The company, which sells brands ranging from Abercromie and Fitch to Superdry as well as its own collections is investing heavily in technology platforms and infrastructure such as warehouses and distribution centres.

Reuters

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