Yahoo Finance Asos goes on spending spree as sales soar
Asos is ramping up its spending on technology and warehousing infrastructure as it looks to grow the business globally, after enjoying a jump in sales in the first half of its financial year.
The online fashion retailer posted a pre-tax profit of £29.9m in the six months to February 28, up 10pc from the same period the previous year. Sales rose 27pc to £1.1bn, putting it on track to smash the £2bn barrier for the first time this year.
Despite the robust figures, shares in the Aim-listed retailer sagged as the company said it would spend £230m to £250m this year and again next year.
The stock fell more than 12pc following the results but regained ground to trade 3.5pc down in lunchtime trade at £67.84.
The company is investing in technology, including personalised “visual search” software, which chief executive Nick Beighton said would be a “game changer for us in many important areas, not only improving customer experience but also lowering the cost of how we operate our business model”.
Asos is also putting money into a new planning system for buying, selling and accounting for stock in multiple locations and currencies, and into new warehouse openings, automation and logistics.
International sales now account for 63pc of retail revenue at Asos. The retailer opened a hub in Berlin last year and will open a warehouse in Atlanta three months ahead of schedule in July, Mr Beighton said.
The company said that these investments would help it reach its goal of securing the capacity for £4bn of net sales, but the spending spree dragged Asos’s cash balance down more than three quarters to £37.7m from £154.3m.
Richard Lim of Retail Economics said that the company’s “intense” spending was “essential in retaining the loyalty of digitally-savvy 20-somethings whose expectations grow ever-more demanding”.
Sofie Willmott of GlobalData, said: “At a time when many clothing and footwear players are struggling to deliver decent sales, Asos’s focus on evolving its product range has bolstered strong growth.”
Separately, Mr Beighton said that the issue of reducing plastic use was “deeply personal” to him and that Asos was looking into alternative materials for packaging, as well as discouraging the use of single-use plastics at its head office. He said that the company could potentially offer a "bag for life" for premium customers in the future, which they could send back to Asos for it to use again when making their deliveries.
