Asos UK sales soar but half year profit is cut by 10pc

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Asos' share price soared more than six per cent this morning after releasing a bullish statement for the rest of the year. 

The figures

Asos has reported a rise in group revenue for the first half to 28 February, with group sales climbing. 14 per cent. UK retail sales soared 27 per cent but profit before tax fell 10 per cent. International sales were still relatively sluggish, but growing at five per cent. 

The etailer had "a record Christmas season", chief executive Nick Robertson added. The business had 9.3 million active customers by the end of February, up 13 per cent on the previous year.

Why it's interesting

Asos has been the darling of investors keen to get exposure to the fast-growing etail industry, but has had a few set backs in recent months, issuing a profit warning last spring as a result of weakness in its international trading, and the warehouse fire affected sales later in the year. 

Asos suffered worse than expected results throughout 2014. However, encouraging quarterly figures released earlier this month resulted in the company's share price rocketing 17 per cent.

Management's confident outlook for the rest of the year, and its investment in key areas such as zonal pricing, whereby prices are determined according to local currency weaknesses, has reassured the City that the company is back on track. 

Prior to the release of the half year results, brokers Jefferies upped its target price for the company and said "the senior management team appears to be back on the front foot operationally and once again, setting the agenda from a communication perspective."

Chief executive and founder of Powa Technologies Dan Wagner added: "Investing in zonal pricing technology has clearly paid off, and the discount pricing strategy, combined with the convenience of their next day delivery and click-and-collect services, have struck a chord with their target markets in the UK and overseas."

Certainly investors seem to be in agreement, with the share price jumping more than six per cent in early trading.

 

What Asos said

Founder and chief executive Nick Robertson said:

The successful launch of our zonal pricing capability and planned investment in our international prices resulted in a gross margin decrease of 230 basis points during the period, which together with increased investment in building our global distribution capacity, has reduced half year profit before tax by 10 per cent to £18m.

"With our continued investment in our international price competitiveness gaining traction, momentum in the business is building. This gives us confidence in the outlook for the second half and that full year profit and margin will be in line with expectations."

In short

Asos's strategy seems to have impressed market watchers and rising retail sales will certainly put a spring in management's step. Investors will be encouraged by the strong UK growth – but now it needs to prove it has muscle in the international markets.