Asos shares tumble as growth slows
Online fashion-retailer Asos reported sales growth beneath expectations for the four months to June, spooking investors and causing its share price to tumble 13 per cent overnight.
That was despite a 14 per cent increase in sales in what CEO Nick Beighton described as a more competitive market.
The slowdown has been attributed to operational changes, essential for the retailer to continue expanding internationally.
“Asos is capable of a lot more,” said Beighton. “We have identified a number of things we can do better and are taking action accordingly. We are confident of an improved performance in the second half and are not changing our guidance for the year.
“We are nearing the end of a major [capital expenditure] program. Whilst this has inevitably involved significant disruption and transition costs, the global capability it now provides us gives us increased confidence in our ability to continue to capture market share whilst restoring profitability and accelerating free cash flow generation,” he said.
Sofie Willmott, lead analyst at GlobalData, said Asos has been able to deliver consistent double-digit top-line growth in recent years due to increased warehouse capacity and improved logistics processes, and the changes being made to US and EU distribution centres are vital to facilitate long-term growth in these key markets.
“Asos will need to focus on winning back disappointed shoppers by bolstering its marketing efforts. Though this may need to include discounts, by recovering customers quickly they will not be lost forever.”
She said Asos continues to innovate and introduce new tools to drive conversion and adapt to its demanding young shopper base, such as its recently added responsible filter.
“However despite strong UK growth, with 62.6 per cent of retail sales coming from international markets, a robust UK performance is not enough to protect top line results.”
“The future remains bright for Asos. The retailer’s agility and willingness to change to remain relevant to its customer base will help it to continue gaining market share both at home and abroad.”
Beighton said the global online fashion market is worth more than £220 billion and growing fast.
“We now have the tech platform, the infrastructure, a constant conversation with our growing customer base who love our own great product and the constantly evolving edit of brands we present to them. We believe that ultimately there will only be a handful of companies with truly global scale in this market.
“We are determined that Asos will be one of them.”