Asos (ASC) shares fell after second-quarter numbers fell short of consensus estimates, reflecting sluggish growth in the UK and Europe, and logistics issues in the US. At constant currency, sales across the Atlantic dropped 3 per cent following issues with distribution, which chief executive Nick Beighton claimed was the result of demand outstripping supply. While this is “very encouraging” in the long term, Mr Beighton says it caused “a significant short-term despatch backlog”. Delayed shipments will be disclosed in the third quarter, although the group says US trading has regained momentum.
Meanwhile, a 12 per cent reported improvement in European sales reflected difficult markets in France and Germany – the group’s two largest continental territories – although more money should be spent on marketing there in the second half as prices stay low. Growth in the UK has also been slower than expected, and while management expects a better performance here in the latter part of the year, better growth should come from Europe and the US. Finally, the ‘rest of the world’ segment – including Australia – performed well, delivering sales growth of 20 per cent.
For now, bosses still expect overall full-year sales to rise 15 per cent, although gross margins may still contract by as much as 150 basis points.
Questions are being raised around how long the Asos online-only retail model can defy the wider sector malaise. Concerns first mounted after the group issued a shock profit warning at the end of 2018, while this update highlighted the challenges of taking the business global. On a positive note, demand remains strong – order numbers grew by 15 per cent to 17.3m – while the number of ‘active’ customers (those who have placed an order in the past 12 months) rose by 16 per cent.
