ASOS posts record interims, boosts investment to keep customers after lockdowns

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ASOS PLC (LON:ASC) posted a record interim performance as Coronavirus (COVID-19) lockdowns forced customers to shop online.

The AIM-listed clothier said some of these customers will move back to stores as restrictions are eased across its markets, but it expects online penetration to remain structurally higher than pre-pandemic levels.

READ: Lloyds Banking and Asos among ‘best shares to play the UK recovery’, says broker

It is therefore boosting investment to support global growth and investing in pricing, particularly in Europe, to remain competitive.

The online retailer added it remains mindful of the widespread economic uncertainty, particularly amid its core 20-something customers, though it said it will benefit from the return of demand for occasionwear.

Returns volumes are also expected to normalise and freight rates expected to remain at very elevated levels for the remainder of the second half.

The outlook for the second half remains unchanged, though full-year forecasts were lifted by an exceptional first half.

Revenues surged 25% to £1.9bn with adjusted profit before tax rocketing to £112mln in the six months to February 28.

The ‘lockdown’ category outperformed again, with face and body products zooming up 114%, activewear jumping 95% and casualwear up 69%.

Last year’s net debt position of £163mln turned into cash of £92mln.

The integration of Arcadia’s Topshop, Topman, Miss Selfridge and HIIT brands progresses to plan, with the one-off costs related to the integration now expected to be £10mln instead of £20mln communicated previously.

Last month, the firm launched its new TGR system to improve its infrastructure and it’s also working to automate the Lichfield Fulfilment Centre in the UK, due to open this year, by 2023. The Atlanta warehouse in the US will also be fully automated in two years’ time.

Analysts at UBS noted that the profit before tax figure was 25% ahead of consensus.

“Operating margins came too close to the ground for comfort in recent years, and if return rates start to spike again, we could see some of the progress in margins come undone. Provided there aren’t any operational slip ups to boot, this won’t be the end of the world, but the comfortable margin position we’re looking at now should be taken with pinch of salt,” said Sophie Lund-Yates, analyst at Hargreaves Lansdown.

“It’s encouraging to see ASOS resonating well with its demographic and continuing to take online share in key markets. Competition out there is fierce, and it’s working hard to remain flavour of the month with the recent acquisitions of Topshop assets.”

Shares dipped 1% to 5,724p on Thursday morning.

–Adds analyst comment, shares–

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