Asos 'rips up the playbook' for pandemic boost

Online fashion group Asos has said the pandemic forced it to "rip up the playbook" as its young customers came to terms with being cooped up at home.

Chief executive Nick Beighton said its 20-something core market normally bought clothes for going out.

But the company's swift "pivot" to casual clothing paid off, with surging sales, profits and customer numbers.

Asos added one and a half million customers in the past six months, giving it a total of 24.9 million.

Sales rose 24% in the six months to 28 February, with profits jumping to £106.4m, up from £30.1m a year earlier.

Mr Beighton told a conference call that under lockdown, there had been a greater emphasis on activewear, casual wear and beauty products.

Asos had "quickly pivoted the customer offer to meet demand" in those areas, he said, with jersey tops and casual bottoms proving strong sellers.

Mr Beighton said Asos was expecting a "shift back to occasion wear" as lockdown restrictions eased. This would begin with daywear, then evening wear, he said.

"During that time, flexibility will be vital for us," he added.

Asos said its integration of Topshop and other Arcadia brands, which Asos bought in February, was "progressing to plan".

As well as Topshop, Asos also acquired the Topman, Miss Selfridge and HIIT brands in a £295m deal, but not their network of about 70 shops.

The company said its latest "record results" had been driven by "exceptional execution".

In the UK, where Asos now has more than seven million customers, sales were particularly strong, climbing by 39%.

As an online-only business, Asos is one of the few retailers that have benefited from lockdown.

"For a long, long time, e-commerce has been growing," Mr Beighton told the BBC.

"What we've seen over the last 12 months is a step-change in e-commerce as a mix of total sales. So we don't think this is a high point, e-commerce is here to stay, but it can sit happily alongside stores."

In the company's results statement, Mr Beighton said he was "delighted" with the "exceptional first-half performance".

"Looking ahead, while we are mindful of the short-term uncertainty and potential economic consequences of the continuing pandemic, we are confident in the momentum we have built and excited about delivering on our ambition of being the number one destination for fashion-loving 20-somethings."

Asos said it was still cautious about the outlook in the short term, because of uncertain economic prospects for its youthful target group.

Risks included possible further Covid-19 peaks, as well as the timetable for the easing of global pandemic restrictions.

However, it added that it was "well positioned to capture demand for event-led product when lifestyles normalise".

Arlene Ewing, investment manager at Brewin Dolphin, said Asos had beaten analysts' expectations on profits.

"The business is in great shape, with cash on its balance sheet and the acquisition and integration of brands such as Topshop yet to be fully reflected in performance," she added.

"With greater geographical diversification and investment in customer fulfilment over the last year or so, Asos is in a very strong position - a fact demonstrated by the more than 400% increase to its share price since the start of the pandemic."

Asos confirmed that customers were still sending back fewer items than expected while coronavirus restrictions were in force, saying "returns-related tailwinds in warehouse and distribution costs" had given the firm a £48.5m boost.

But Chloe Collins, senior retail analyst at GlobalData, said that a post-pandemic resurgence of occasion wear and going-out styles could mean that customers resumed their old practice of returning more clothes.

She added: "Though there is light at the end of the Covid-19 tunnel and Asos will be ready for increased demand for its more fashion-forward, dressy designs, shoppers' desire for more comfortable and versatile clothing is expected to be a long-term switch.

"Therefore, it should ensure that these styles retain a high presence on its social media platforms and that it showcases how items can be styled to suit multiple end uses."