GlobalData praises agile Asos for riding out coronavirus storm

Asos sales rose sharply during the early months of the coronavirus outbreak.

The fast fashion retailer said revenues grew by 10% to £1 billion in the four months ending June, with a significant acceleration following a sales decline of up to 25% when lockdown measures came into play during March.

As a pureplay, Asos has had a lot less problems to deal with than many of its store operating competitors in recent months. Nonetheless, it still primarily operates in the product sector that is expected to be the worst hit this year and, as a fashion retailer, has weathered the outbreak well so far, argues Sofie Willmott, Lead Retail Analyst at GlobalData.

Although other clothing and footwear players have reported stronger uplifts in online performance, this has largely been channel shift as their stores closed and overall their sales performance has been a lot worse than Asos’, with its sole channel affording it some protection as spend has transitioned online.

H&M, for example, reported online sales rising 40% in the six months to 31st May 2020. However, total group sales fell 22.9%. Arch rival boohoo, meanwhile, racked up far higher growth (group revenue rose 44.6% for three months to 31st May 2020) prior to the allegations of slave labour which have since knocked its market value down below Asos’.

“Asos’ tactical trading, alongside the removal of ‘non strategic costs’ has boosted profitability and it expects FY profits to be significantly higher than last year, also stating it will pay back previously claimed furlough support from the UK government,” Willmott comments.

The outlook is not particularly bright for any fashion brand at the moment with the threat of a potential second wave, economic uncertainty and high unemployment especially among Asos’ young target customer base. Indeed, Chief Executive, Nick Beighton, has expressed caution about the financial outlook for 20-something customers,

However, Willmott believes that the company’s more flexible business model, its wide product range and its reputation as a fair retailer that has implemented measures to protect its staff and work with its suppliers through the pandemic, will afford it more protection than some of its competitors.