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Asos grows retail sales in a promotion-heavy Q1

Asos has announced its first quarter earnings for the 2016/17 financial year. In the four months to December 31, the UK-based pureplay online retailer recorded total retail sales of £605.7 million, up 36 per cent on the corresponding period.

UK sales increased 18 per cent, while international sales jumped 52 per cent, aided by the weakness of the British pound and US import duty benefits.

According to the retailer, active customers grew 25 per cent in Q1 to 13.4 million, of which 8.5 million were located outside the UK. Asos said its retail gross margin down by 30 basis points in line with plan.

“Following record sales over Cyber weekend and the Christmas trading period, I’m pleased to report a strong start to the year. A 50 per cent plus increase in international sales is a standout performance. UK sales growth at 18 per cent was a strong performance in a more promotional market,” Asos CEO Nick Beighton said.

Indeed, Q1 2016/17 saw Asos offering blanket discounts of 20 per cent for Halloween and a five-day Black Friday period, as well as 30 per cent off selected categories in the run up to Christmas.

Sarah Johns, an analyst at Verdict Retail, said these offers clearly resonated with shoppers, but suggested Asos should avoid blanket discounts in future.

“Asos should use the wealth of data it has on customers to offer customers tailored discounts on products they are likely to buy rather than blanket discounting,” she said.

“Part of the reason behind Asos’s consistent success is the way it successfully targets customers with creative email and social media marketing on platforms such as Twitter and Instagram.”

This approach combined with an attractive delivery option encouraged consumers to choose Asos over other online retailers in Q1 2016/17. (Asos Premier offers customers 12 months of unlimited next-day delivery for £9.95.)

At the same time, strong growth in international sales as a result of the weaker pound means the retailer will have to keep up with order fulfilment, Johns said.

“This will be imperative as rival retailer seizes market share away from Asos through its own global expansion. The decision from CEO Nick Beighton in January 2017 not to raise prices should help ASOS stay competitive in a busier-than-ever online fashion pureplay market,” she said.

Beighton said sales for the year are now expected to be up by around 25 to 30 per cent. He said Asos will be accelerating its infrastructure investment to handle that growth. 

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