Asos has reported a 33% rise in full-year sales to £1.92 billion. Pre-tax earnings were up 145% to £80 million in the 12 months to 31st August, on the back of a weak pound and a strong international performance.
CEO, Nick Beighton, was in understandably bullish mood as he hailed “another exceptional year” for the online fast-fashion retailer. Group revenues were up 33% and retail sales 34%, driven by strong product, price and proposition improvements.
“The UK was solid at 16% growth in a very competitive market and we had significant international sales growth,” he said. “We finished the year with a strong cash position of around £160 million. All our KPIs are moving in the right direction. We have record active customers, up 24% to just over 15 million. We’ve seen strong growth in average basket value, order frequency and conversion rates, and we’ve shipped just under 50 million orders, which is up 34% year-on-year.”
Whilst UK performance was good compared to many of its competitors, there was also a slowdown from the previous year. “Mathematically it’s a bigger number each year,” Beighton countered. “I do think 20-somethings are facing economic challenges. Everything that they consume will have a greater level of inflation on it than ever before, so their disposal income will have a few more challenges around it. But they will still be interested in having the right outfit at the right price and we’re expecting FY2018 growth to not be less than 16% in the UK. The first six weeks of the year have started well for us, and I’m pretty happy with that.”
International expansion
He added that Asos is positioning itself as a global company; less than 40% of its business is now UK-based and international has grown just shy of 50% over the course of the year. “In terms of the main growth over the next 12 months, I’m expecting this will be within our key market of the EU and the US, which is where the majority of our investment is going.”
A major part of this is an agreement is to establish a new $40 million, 10 million unit capacity, North American eCommerce fulfilment centre in Union City, outside of Atlanta, Georgia. Fit out commenced recently and the facility is expected to be operational by autumn 2018, providing more cost-effective, faster and more flexible delivery options. The company currently relies on a small warehouse in the country which manages around 25% of all Stateside orders, with the remainder being dispatched from the UK.
Also key here is the transition to the Berlin-based Eurohub 2, which measures 44,000 sq m, with the potential to expand to 90,000 sq m. The project is progressing well, with phase one complete. “We are looking at contingency planning to see whether that will become more beneficial to us in the event of Brexit and falling out of the Customs Union,” explained Beighton.
Asos is exploring the possibility of moving away from Barnsley in the UK as the main hub that distributes to the world, to Eurohub becoming the main hub that distributes back to the UK.
A potential downside here is a backlog at European ports if the UK doesn’t get a customs arrangement with the EU, although ASOS says that this isn’t on its radar right now. “Clearly, though, anything that interrupts the flow of goods won’t be great news.”
Technology, technology, technology
Asos has, meanwhile, been investing heavily in infrastructure. Within technology and logistics, all major investments are going to plan. “In technology, we’ve executed over 1,300 improvements in the customer journey over the course of the year. In terms of delivery solutions, there have been 200 improvements.”
This includes the roll-out of Asos Instant – a same day delivery option for its London customers which is now available on orders placed before 10am, Sunday - Friday. It will cost £12.95 and parcels will be delivered between 6 - 10pm.
As the service is less than a week old, Beighton declined to give any user stats, but he did reveal that plans are afoot to take it to other major cities around the UK, with a greater proximity to Barnsley, in the coming months. The £12.95 price tag has raised eyebrows, given the Asos mission statement of truly resonating with the people who use it, because it's built by them.
“What I would say is that, if you’ve turned up to work without an outfit for that dinner party tonight, you can have it same day and sometimes that might be worth the price. Every time we grow our volume, it gives us the ability to lower prices and that’s how we’ve done every delivery service. The more volume goes through it, the cheaper we can make it.”
The Eurohub could also provide the opportunity to bring Asos Instant to some German cities. “But that isn’t a definite, it is just part of our thinking.”
Visual search and augmented reality
Asos has also been circling visual search, facial and body augmented reality and the early results have been “very encouraging”. In a nutshell, its agile technology platform is allowing it to accelerate its pace of innovation, paving the way for the likes of new payment methods and additional language sites. “The investments we are making will see us add 1,000 new heads and will lay the foundations for a c.60% increase in unit capacity and c.£4 billion of net sales. The potential for our company remains huge,” said Beighton.
As competition from multi-channel operators and pureplays continues to intensify, and Brexit uncertainty bites, the road ahead won’t be easy, but Beighton remains confident, “we are positioning Asos to be the world’s number one destination for fashion loving 20-somethings.”