Asos shares surge as profits climb sharply

Asos has reported a double-digit rise in annual profits and revenues and stepped up its ambitions for further growth despite tough conditions facing the retail sector.

Shares were 17% by the close of trading after the online fashion retailer said pre-tax profits for the year to 31 August rose 28% to £102m and revenues climbed by 26% to £2.42bn.

That included a 23% rise in retail sales for the UK, which represents more than a third of revenues, despite what the company described as a “challenging market”.

It was helped by more frequent orders from existing customers.

The results beat forecasts and took the 18-year-old company, which sells fashions aimed at twenty-somethings, another step closer to achieving its long-term goal of earning revenues of £4bn.

“But that’s not the end for us,” chief executive Nick Beighton told reporters.

“We will continue to invest and we’re eyeing up a significantly bigger prize than £4bn.

“The opportunity for Asos remains huge which is why we’re investing to capture it.”

Asos invested £242m over the financial year, mainly on warehouse and IT, and plans to spend £230-250m a year over the medium term.

It is continuing to report robust sales growth at a time when traditional fashion retailers Marks & Spencer, Debenhams and House of Fraser have been struggling and closing stores.

Mr Beighton said online sales currently account for about 24% of the UK clothing market and that this is forecast to hit 30% within five years, with the US and Europe following a similar pattern.

The results come as the difficulties at bricks-and-mortar retailers prompt calls for a relaxation of business rates and the imposition of an online sales tax to level the playing field.

Mr Beighton said: “It strikes me the core problem to solve and where the attention should be is on solving corporation tax leakage and fixing business rates.

“We will pay whatever tax the Government says we should pay.”

Shares had fallen 26% this year prior to Wednesday’s update, partly because of a sharp drop in July when it missed analysts’ forecasts for third quarter growth.

George Salmon, equity analyst at Hargreaves Lansdown, said: “There’s been a few niggling worries around the Asos growth story recently, but these results should put them to bed.

“Asos has delivered strong growth despite a weak UK consumer environment.”

(c) Sky News 2018: Asos shares surge as profits climb sharply