Asos enjoys 37% rise in sales

Online fashion retailer's shares hit new high after better-than-expected sales growth in second quarter

Asos, the online fashion retailer favoured by the likes of X Factor judge Nicole Scherzinger and TV presenter Fearne Cotton, shrugged off Britain's economic difficulties to enjoy an impressive 37% rise in sales in the three months to the end of February.

The company, which stocks brands ranging from American Apparel to Warehouse, revealed that UK sales rose a better-than-expected 28% to £59m in the second quarter of its financial year as it benefited from shoppers drifting away from the high street and onto the internet over Christmas.

Nick Robertson, the chief executive who founded the company in 2000, said: "The shift to the internet is stronger than the impact of the downturn."

The shares closed up 7.55% at a new high of £33.55 on Wednesday even though the figures imply that growth has slowed slightly since December, when sales rose 41% after the company cut prices on its own-label clothing.

Robertson said metallic, snakeskin-effect and monochrome outfits were among the bestsellers. "We are pleased the momentum is continuing and if there was one 'silver bullet', it was cutting prices," he said. He added that Asos had benefited because some of the brands it stocked, such as River Island, also trimmed prices, recognising that their young shoppers had less money to spend.

Outside the UK, sales rose 45% to £76.7m for the quarter as Asos launched dedicated websites in France and Germany, its two biggest foreign markets. International sales now make up 59% of the company's revenues, 2% more than a year ago, and it is aiming to launch dedicated Russian- and Chinese-language websites by October.

Asos also intends to boost international sales by launching its mobile-based magazine, Fashion Up, in other languages, including French, German, Spanish and Italian. The company has seen a rapid rise in customers using mobile devices, who now account for 20% of the traffic to its site, up from about 11% a year ago.

Robertson said spending on marketing would rise by £15m this year as Asos also increased the amount it spent on creating magazine-like content in a range of languages for its website, and increased its digital advertising.

He said he was "delighted with our robust first-half performance", and was positive about the outlook for the rest of the financial year.

He admitted that stronger growth in the UK, where sales are subject to VAT, meant the company's gross margin had dipped slightly in the quarter. He expects margins to rise over the full year.

Freddie George, an analyst at the City broker Cantor Fitzgerald, said: "We continue to believe the company will not disappoint with earnings and will achieve its longer-term target of £1bn of sales by 2015."

Shares in Asos have soared in the past year as investors have piled into one of the winners from shoppers' move from the high street to the internet. BestSeller, a Danish retailer, has increased its stake in Asos to about 28%, close to the point where it would have to make a bid for the whole company.

Robertson said there had been no discussions about a takeover and that BestSeller had not made its intentions clear. But he said he did not expect a bid. "I'd like to think they are not in it to own the business, but to be a part of it. They are one of our top two or three suppliers."

Robertson, a great-grandson of the suit-maker Austin Reed, started Asos (which originally stood for As Seen On Screen) when he heard that 25,000 viewers had rung the producers of the Friends TV show desperate to find out how they could buy some of the clothes featured.

Contributor

Sarah Butler

The GuardianTramp

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