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ASOS raises profit forecast on strong Christmas

On Wednesday, British online fashion retailer ASOS (LON:ASC) reported strong Christmas trading and raised its half-year profit forecast by £40m, which would take its full-year results to the top end of market forecasts, but has warned that post-Brexit tariffs could cost it £15m in the next financial year.

Analysts have forecast a pre-tax profit of between £115-170m, compared to a pre-tax profit of £142.1m in 2019-2020, and ASOS has said that it expects ongoing Covid-19 restrictions to keep online sales high in the first half of 2021. Overall sales grew by 24% to £1.36bn in the four months to 31 December and the company reported an additional 1.1 million new customers over the same period.

The performance was driven by a 36% jump in UK sales alone, which rose to £554.1m, with spending increasingly driven online as lockdown restrictions returned in November and again in the final weeks of the year.

ASOS has left its full-year sales forecast unchanged, but chief executive Nick Beighton explained:

“Looking forward, given the uncertainty associated with the virus and the impact on customers’ lives, our cautious outlook for the second half of the year remains unchanged. However, the strength of our performance gives us confidence in our continued progress towards capturing the global opportunity ahead”.

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“We are really pleased with the strong performance we have delivered, which is testament to both the strength of our multi-brand model and the hard work of our people. We have continued to execute well and deliver for our customers, whilst investing into growing our business and driving further efficiency through a strong operational grip”.

Nevertheless, the impact of Brexit cannot be escaped entirely. ASOS has said that it expects to incur excess costs due to country of origin issues. Although the company has been able to continue selling products on its European websites since the UK left the EU – largely without incurring tariffs because most are shipped from its warehouse in Berlin – there have been some instances where products have not been able to be dispatched from the central Berlin warehouse.

“We’ve not been able to get every product to go direct to Berlin in every single circumstance,” Beighton told Reuters, explaining that ASOS deals with 800 third-party brands as well as its own-brand products.

“Some of the smaller brands have not been able to re-structure to go direct to Berlin rather than Barnsley so there’s still some re-balancing that needs to be done. Over the coming years as they grow we will work to mitigate that cost impact”.

Britain’s Brexit trade deal was billed as preserving its zero-tariff and zero-quota access to the bloc’s single market, but Beighton disagrees with how it has actually turned out: “It isn’t actually a no tariff deal”.

Shares at ASOS were up 3.46% to 5376.00p at GMT 14:58 on Wednesday, extending gains of over 56% in the past twelve months.

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