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Asos Profit Declines as Investments Hurt Margins

Asos Plc, the U.K.’s biggest online-only retailer, reported a 10 percent decline in first-half profit, hurt by a new pricing policy and investments to speed up shipping.
Fashion on ASOS | Source: ASOS
By
  • Bloomberg

LONDON, United Kingdom — Asos Plc, the U.K.'s biggest online-only retailer, reported a 10 percent decline in first-half profit, hurt by a new pricing policy and investments to speed up shipping.

Pretax profit decreased to 18 million pounds ($27 million) in the six months through February, the London-based company said in a statement Wednesday. The retail gross margin narrowed by 270 basis points to 46.8 percent.

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

The company, which sells Converse sneakers and Cheap Monday jeans to twenty-somethings, is gradually introducing pricing for individual markets to better adjust to currency swings. The retailer has also recovered after a fire in June at its Barnsley distribution center, which is the size of six football pitches, hurt business.

Profit was helped by an insurance payment of 6.3 million pounds. Distribution costs rose 8 percent to 78.7 million pounds as orders rose 14 percent in the period.

Asos shares rose 13 percent March 12 after the retailer said total retail sales rose 14 percent in the first half , with U.K. sales up 27 percent and international sales gaining 5 percent.

The retailer has said sales of 2.5 billion pounds is its “next staging post,” without giving a timeframe. Analysts predict sales of 1.15 billion pounds for the 12 months ending in August, according to estimates compiled by Bloomberg. They expect Asos to first exceed 2.5 billion pounds in 2020.

By Katarina Gustafsson; editors: Matthew Boyle and  Thomas Mulier.

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