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Asos to raise £500m for global expansion

Asos website
Asos website

Young shoppers splashing out on comfy clothes in lockdown has pushed half-year profits at Asos to a record high as the online retailer revealed it was seeking to raise £500m of debt to expand.

The fast-fashion firm, which started in 2000 as As Seen On Screen, highlighted a £48.5m “net Covid-19 benefit” as consumers switched to online orders and hundreds of thousands of non-essential stores were forced to shut.

It plans to use the £500m from the bond raise to expand globally more aggressively, the firm said. The share price has risen by almost two thirds in the past year.

Profits rose 253pc to £106.4m, up from £30m the year before, while sales climbed 24pc to almost £2bn. The company said it now expected full-year profits to total £175m compared with previous forecasts of £150m.

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Nick Beighton, chief executive, said it sold 13.3m dresses - the equivalent of one every second - during the six months to Feb 28.

Its home market, the UK, shone the brightest as sales rocked 39pc to £880m. It added a flurry of new customers to its pool of almost 25m active shoppers.

“The UK is always surprising on the upside,” said Mr Beighton. “We’re very pleased with that exceptional performance in the UK and delighted with it.”

The company now wanted to focus on growing its presence in North America over the coming years, he added.

Chloe Collins, a retail analyst at GlobalData, said: “Particular focus on building US awareness of its casualwear offer is essential, with the market’s growth much more muted than the UK and Europe, as US shoppers still primarily view the retailer as an occasionwear destination."

Asos warned that sales are likely to slow down as shops reopen. Britons will also be less inclined to spend money on clothes as they head to restaurants and bars and go on holidays again, it said. The company expects customer returns to increase after a period of goods being sent back less frequently, which will increase costs.

Demand for comfort during lockdown led to a sales increase of 95pc within Asos's activewear division, while sales of hoodies and joggers grew by 69pc. Cosmetics sales shot up 114pc thanks to new third-party brands such as Charlotte Tilbury on its website.

The beauty category has become a highly-contested battleground for retailers including Next and more recently Boohoo after it acquired Debenhams’ website from administrators. The department store chain was one of the UK leaders in premium beauty before its collapse last December.

In February, Asos fought off competitors to acquire Topshop, Topman, Miss Selfridge and HIIT for £330m following the collapse of Sir Philip Green's Arcadia retail empire.

Mr Beighton said the company's integration of the Arcadia brands had been a success, with Asos selling the full ranges online three weeks after the deal.

Richard Lim, chief executive of Retail Economics, said: “It shows the kind of agility that other retailers aspire to.”

Asos said it is selling through its remaining Burton stock, another Arcadia brand which was bought by rival Boohoo, but Mr Beighton said it had ceased trading with the brand.

Profit margins at Asos were dented slightly during the half-year due to combination of increased freighting costs caused by disruption on global supply chains, foreign exchange fluctuations and shoppers buying fewer occasion dresses and smart shoes, which are more profitable.

Finance chief Mathew Dunn said that the product flow between the UK and the Continent “is taking substantially lower” due to Brexit, but there was no impact on stock.

“It has introduced incremental costs and slowed our business down,” he added.