TIDMASC
RNS Number : 0085T
ASOS PLC
15 July 2020
15 July 2020
ASOS plc ("the Company")
Trading Statement for the four months ended 30 June 2020
ASOS on track to deliver strong profit growth for full year
ASOS today announces trading for the four months to 30(th) June
2020. Our main priority through the period was protecting the
health and wellbeing of our people and our customers through the
global pandemic and this was reflected in the strict social
distancing protocols implemented and adhered to across our
business. Within this context, we have continued to focus on
trading dynamically and managing business performance rigorously.
This is evident in our P3 performance, which shows a steady
improvement in sales growth through the period alongside materially
improved levels of profitability and cash generation.
Four months to 30 June Ten months to 30 June
Reported CCY(2) Reported CCY(2)
GBPm(1) 2020 2019 Increase Increase 2020 2019 Increase Increase
-------- ------ ---------- ---------- -------- -------- ---------- ----------
UK retail sales 329.2 334.1 (1%) (1%) 906.3 815.6 11% 11%
EU retail sales 328.0 269.0 22% 20% 816.1 671.2 22% 22%
US retail sales 124.9 121.4 3% (2%) 327.5 283.0 16% 13%
ROW retail
sales 201.2 169.5 19% 18% 484.8 405.5 20% 19%
International
retail sales 654.1 559.9 17% 15% 1,628.4 1,359.7 20% 19%
-------- ------ ---------- ---------- -------- -------- ---------- ----------
Total retail
sales 983.3 894.0 10% 9% 2,534.7 2,175.3 17% 16%
-------- ------ ---------- ---------- -------- -------- ---------- ----------
Total group
revenue(3) 1,014.2 919.8 10% 9% 2,611.0 2,234.3 17% 16%
-------- ------ ---------- ---------- -------- -------- ---------- ----------
(1) All numbers subject to rounding throughout this document,
(2) Co nstant currency is calculated to take account of hedged rate
movements on hedged sales and spot rate movements on unhedged
sales, (3) Includes retail sales, delivery receipts and third-party
revenues
P3 Results Summary
-- Group Sales up 10% to GBP1,014.2m with a steady improvement throughout the period, reflecting increasing
warehouse capacity, underlying improvement in demand and a beneficial returns profile
-- Active customer base increased to 23m, +16% year on year, with particularly strong growth in new international
customers
-- Item growth +15% whilst ASP down driven by 'lockdown' product mix and limited demand for occasion wear
-- Good agility shown in refocussing product mix in response to customer demand; growth in 'lockdown' categories
held back by availability given health and safety measures implemented across our product supply chain
-- Strong recovery in EU and ROW reflecting easing of 'lockdown'
-- UK & US reflect more pronounced impact from product mix shift and consumer dynamics related to 'lockdown'
measures
-- Gross margin -70bps despite adverse product mix reflecting tight inventory management
-- Improved profitability and cash generation delivered despite the Covid-19 demand and supply impacts as we
continue to focus on our non-strategic cost agenda
-- Previously claimed furlough support from UK Government to be repaid
Outlook:
-- Against the backdrop of continued social distancing, ongoing restrictions of events and an uncertain economic
outlook for our 20-something customers, we remain cautious on the short to medium term outlook on demand
-- FY20 PBT expected to be towards the top end of market expectations, despite material incremental Covid-19 costs,
supported by rigorous performance management, continued removal of non-strategic cost and beneficial returns
profile
-- Strong net cash position reflecting proactive actions; robust cash management expected to deliver return to
positive FCF in FY20
Nick Beighton, CEO, commented:
"This has been a tough time for all businesses, but we have
remained focused on doing the right thing for our people and our
customers and making sure that we emerge from the current crisis as
a stronger and better organisation. I am particularly proud of the
resilience, flexibility and creativity the ASOS team and our
business partners have shown.
Our performance in P3 shows that we are delivering against this
aim despite the tough economic and social backdrop. We have learnt
a lot and adapted quickly, and ASOS finishes the period with
improved underlying profitability. While we remain cautious about
the consumer impact of Covid-19 looking forward, we are on track to
deliver strong year-on-year profit growth and to return to positive
free cash flow for the full-year ."
Investor and Analyst conference call:
ASOS will be hosting a webcast for analysts and investors at
8.30am (UK time) today. Please join via the link:
https://www.asosplc.com/investors/financial-calendar or dial +44 20
3787 4277 , and use conference call ID: 484 362 083#
A recording of this webcast will be available on the ASOS Plc
investor centre website later today:
http://www.asosplc.com/investors.aspx
For further information:
ASOS plc Tel: 020 7756 1000
Nick Beighton, Chief Executive Officer
Mathew Dunn, Chief Financial Officer
Alison Lygo, Investor Relations
Website: www.asosplc.com/investors
Headland Consultancy Tel: 020 3805 4822
Susanna Voyle / Stephen Malthouse / Fay
Rajaratnam
JPMorgan Cazenove Tel: 020 7742 4000
Bill Hutchings / Christopher Wood
Numis Securities Tel: 020 7260 1000
Alex Ham / Luke Bordewich
Forward looking statements:
This announcement may include statements that are, or may be
deemed to be, "forward-looking statements" (including words such as
"believe", "expect", "estimate", "intend", "anticipate" and words
of similar meaning). By their nature, forward-looking statements
involve risk and uncertainty since they relate to future events and
circumstances, and actual results may, and often do, differ
materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save
as required by applicable law, the Company undertakes no obligation
to publicly revise any forward-looking statements in this
announcement, whether following any change in its expectations or
to reflect events or circumstances after the date of this
announcement.
Background note:
ASOS is an online retailer for fashion-loving 20-somethings
around the world, with a purpose to give its customers the
confidence to be whoever they want to be. Through its
market-leading app and mobile/desktop web experience, available in
ten languages and in over 200 markets, ASOS customers can shop a
curated edit of 85,000 products, sourced from 850 of the best
global and local third-party brands and its mix of fashion-led
in-house labels - ASOS Design, ASOS Edition, ASOS 4505 and
Collusion. ASOS aims to give all of its customers a truly
frictionless experience, with an ever-greater number of different
payment methods and hundreds of local deliveries and returns
options, dispatched from state-of-the-art fulfilment centres in the
UK, US and Germany.
ASOS's websites attracted 235.7 million visits during June 2020
(June 2019(1) : 197.4 million) and as at 30 June 2020 it had 23.0
million active customers(2) (30 June 2019: 19.9 million), of which
7.0 million were located in the UK and 16.0 million were located in
our international territories (30 June 2019: 6.3 million in the UK
and 13.6 million internationally).
(1) Restated visits, previously reported number 200.9 million,
(2) Defined as having shopped in the last twelve months as at 30
June
Performance Summary
Total sales growth has improved materially since March when
containment measures were introduced by governments in response to
Covid-19. As we said at HY results, sales were c.20 to 25% lower
when those measures were first introduced. We are therefore pleased
to have delivered 10% sales growth for the period overall. This
performance was supported by good new customer acquisition, strong
growth in 'lockdown' product categories (casualwear, activewear,
face + body), an overall improvement in underlying demand and
beneficial returns behaviours showing more deliberate
purchasing.
Our underlying profitability and cash generation through the
period was strong and reflective of the operational rigour with
which we managed the business through unprecedented levels of
uncertainty. This rigour to managing the business, including
adjusting our intake profile, means that we do not foresee a
material inventory risk or write off requirement relating to
Covid-19.
Notwithstanding the strong recovery in sales, our growth was
held back by a number of factors relating to the Covid-19 pandemic
and associated customer behaviour as we sought to appropriately
balance sales growth with protecting business performance and the
customer experience.
We managed performance in the context of protecting the health
and wellbeing of the people across our business through this global
pandemic. Our warehouse throughput capacity was significantly
reduced to ensure social distancing standards could be maintained.
Accordingly, we adopted a more limited approach to promotional and
marketing activity in line with capacity. Secondary to that is the
impact of consumer behaviour. Given the restrictions introduced, we
saw a pronounced shift in demand away from the event led categories
where ASOS is most established. The reduction in event led demand
for occasion wear (dresses and formalwear) led to less frequent
spend from our existing customers as well as a mix towards lower
ASP product. In response to this, we refocused our product mix
towards those categories seeing greater demand. Whilst our model
has shown a good degree of agility in delivering this, customer
demand for key 'lockdown' category product has outstripped
supply.
From a regional perspective, we saw good recovery in the EU and
ROW, reflective of lockdown easing which started to drive a more
normalised product mix, alongside good new customer acquisition. In
the UK and US, product demand remained skewed more heavily towards
'lockdown' categories and was therefore greater impacted by product
supply and availability, with a proportionately lower benefit from
customer acquisition in the UK given the strength of our existing
position.
Through a continued focus on improving capacity in our
warehouses, whilst also ensuring social distancing is maintained,
we have been able to increase throughput capacity as the period has
progressed. This has enabled us to restore our proposition and
return to a more dynamic trading stance which has supported the
improvement in our sales growth through the period.
Product
Customer demand for product changed dramatically towards
casualwear as countries entered lockdown, and we saw an immediate
and pronounced mix shift towards activewear, casualwear and face +
body. Year on year growth in these categories has been extremely
strong over this period up almost 50%. However, they represent a
smaller share of our overall product mix and this demand came at
the expense of demand for occasion led categories where ASOS,
particularly ASOS Design, is most established, notably dresses and
formalwear. In the comparable period last year, activewear,
casualwear and face + body accounted for 23% of our mix, whilst
dresses, formalwear, fashion footwear and outerwear represented 48%
of our mix.
This shift in product demand was reflected in a reduction in
average selling price, which was 9% lower in the period and flowed
through to average basket value. The categories that outperformed
also attract an overall lower gross margin. However, this was
offset by beneficial returns behaviour associated with these
product categories and we saw a move towards more intentional
purchasing.
Whilst the strength of our brand in the key occasion led
categories positions us well for the future and differentiates us
from a customer perspective, demand is likely to be constrained
until a more normal pattern of events, holidays and social
behaviour resumes.
We focussed on working in a collaborative way with our suppliers
throughout the disruption, ensuring regular and open dialogue.
This, alongside the strength of our long-term supplier
relationships, enabled us to navigate the disruption to sourcing
that lockdown caused across the globe and we were pleased to be
able to take receipt of all ASOS Design product that had been made.
This supports our relationships and continuity in our supply chain
as we plan together for a less certain profile of demand.
Warehouse Throughput Capacity
We implemented significant throughput capacity restrictions in
our UK and European warehouses whilst operations were amended to
enable effective social distancing. Our warehouses are highly
automated, which results in the workforce being concentrated in
certain high-density areas. This, therefore, required our processes
to be redesigned rather than simply increasing distancing between
members of the workforce. Within our Euro hub, we also faced a
reduction in our available workforce whilst the border between
Germany and Poland was closed.
At its low point, available labour in our European and UK
warehouses was at 45% and 63% respectively of our prior planned
capacity. This drove a number of customer facing decisions as we
worked to restore capacity to the required levels. Most notable
was, the speed of delivery. We updated our delivery promise across
our sites to ensure we were transparent and up front with customers
before point of order on the speed of delivery. Accordingly, next
day delivery was not available in the UK or Europe for 5-7 weeks
and our standard proposition had up to 11 days added to it for 10
weeks.
The teams in our warehouses have made great progress in
restoring capacity and both hubs are now operating with good
headroom. This has allowed us to restore our delivery proposition
across all our key markets. We are continuing to improve capacity
throughput further, to ensure that our facilities can support peak
trade whilst adhering to social distancing.
Trading Stance
As a result of the capacity restrictions in our warehouses, we
chose to soften our promotional calendar and reduce our investment
in performance marketing to ensure we weren't stimulating demand we
couldn't effectively service. Our performance marketing spend was
reduced year on year and we removed a number of like for like
activities.
These decisions undoubtedly impacted traffic, demand and
customer acquisition, particularly in the context of a more
promotionally active market. However, these decisions protected our
profitability and the customer experience as we managed through an
unprecedented level of operational change and prioritised the
health and safety of our people.
We ensured regular communication with our customers on how and
why we were managing our proposition in the context of Covid-19 and
health and safety. This included the slower than usual delivery
speeds referred to above, but also the 90-day extended returns
period we chose to offer.
Customer
We saw good engagement throughout the period, across our social
media channels and in traffic to our sites. Traffic was up 13% in
the period on an improving trajectory and we had our strongest ever
month for social media engagements in May with over 9 million
likes, comments and shares, up over 90% vs the prior month.
Consumers have reacted very positively to our content and the way
it has pivoted to reflect realities of lockdown living, and this
reflects the strength of our engagement with customers beyond a
role as a transactional platform.
Our active base increased by 0.7m customers in the period which
we are particularly pleased with given our reduced level of
marketing and promotional activity. In line with our six key
priorities for the year, we continue to focus on optimising our
approach to customer retention and will work to drive engagement
with these newly acquired customers.
We saw good new customer acquisition, particularly in our
international territories, with these customers driving strong
growth in 'lockdown' product categories. Reactivated customer
growth was also good globally. However, spend from our existing
customers was more subdued through the period, reflective of the
changing product mix, associated reduction in ASP and the lack of
occasion led demand to shop.
Cash & Profitability
Rigorous performance management alongside a continued focus on
removing non-strategic cost have driven improvements in underlying
profitability and cash generation. We took decisive action to
protect our profitability in response to uncertain consumer demand,
warehouse capacity restrictions and adverse product mix. Increasing
warehouse efficiencies and a stronger operational grip have further
underpinned our performance and as a result we now expect to
deliver substantial year on year profit growth in FY20.
As a result of our expectation that we will deliver a better
than initially anticipated full-year performance, we are repaying
the support we received from the UK Government furlough scheme.
From a liquidity perspective, we took decisive precautionary
action during the early stages of the pandemic in response to the
significant uncertainty in outlook. This approach has allowed us to
work proactively with our supplier base, ensuring we were able to
pay to terms and take receipt of all ASOS Design product that had
been made. We have subsequently secured a further one-year
extension for our core GBP350m RCF facility, which now matures in
July 2023. We retain the option for a further one-year extension,
to be agreed in 2021.
Following the material improvement in trade since April
alongside robust working capital management we expect to deliver
positive free cash flow in FY20 and end the year with a very strong
net cash position.
Priorities & Outlook
We continue to focus on trading through spring/summer with an
agile and dynamic approach as we also prepare for autumn/winter. We
will be working closely with our supplier base to ensure we are
positioned with the right product and flexibility to maximise
opportunity across the peak period and the season ahead. We will
continue to develop those product categories which remain a
long-term and differentiated asset for ASOS, alongside reshaping
our customer facing offer through this period of increased
uncertainty.
Within our warehouses, progress continues to build further
capacity, in line with social distancing protocols, to ensure we
are able to service peak demand, a target we are comfortable in our
ability to reach.
Beyond the specific challenges associated with this pandemic,
our focus on our six key priorities for the year remains. We have
continued to progress with identifying and removing non-strategic
cost across the business and have determined further opportunities
to drive efficiency through the crisis. Our internal capabilities
were further bolstered during the period with Patrik Silen, Chief
Strategy Officer, and Jo Butler, Chief People Officer, joining our
executive team. We will continue the momentum we have built on
optimising our approach to customer acquisition and retention,
looking to deploy the learnings we have taken so far this year to
continue to drive customer engagement, particularly with those we
have recently acquired.
We remain cautious in the outlook for consumer demand, cognisant
of the significant uncertainty ahead, particularly as the
medium-term economic consequences start to emerge for our
20-something customers. We expect continued limited demand for
occasion led wear until a more normal pattern of social events
resumes, the timing of which is hard to predict, particularly in
the context of a risk of a second-wave. Stock availability from
some brand partners may also remain a challenge into
autumn/winter.
Despite this uncertainty, we are confident that our rigorous
performance management and strong operational grip will deliver an
improved financial performance this year and ensure we emerge as a
stronger, more diverse and more resilient business. As we look
further ahead, we are well capitalised, with a differentiated
product offer and global infrastructure to leverage. This gives us
continued confidence that ASOS will continue in progressing as one
of the few truly global leaders in retail.
Appendix 1 - Retail sales growth by period in sterling
Year ending 31 August 2020
2019/20
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% YTD YOY%
------- ----- ----- ----- --------
UK retail sales 408.9 18% 168.2 26% 329.2 (1%) 906.3 11%
EU retail sales 332.5 21% 155.6 23% 328.0 22% 816.1 22%
US retail sales 139.3 23% 63.3 32% 124.9 3% 327.5 16%
ROW retail sales 194.2 23% 89.4 14% 201.2 19% 484.8 20%
International
retail sales 666.0 22% 308.3 22% 654.1 17% 1,628.4 20%
------- ---- ----- ---- ----- ---- ----- ---- -------- ----
Total retail
sales 1,074.9 20% 476.5 23% 983.3 10% 2,534.7 17%
------- ---- ----- ---- ----- ---- ----- ---- -------- ----
Year ended 31 August 2019
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2018/19 YOY%
----- ----- ----- ----- --------
UK retail sales 347.8 16% 133.7 18% 334.1 16% 177.8 12% 993.4 15%
EU retail sales 275.9 17% 126.3 11% 269.0 5% 154.5 17% 825.7 12%
US retail sales 113.5 11% 48.1 3% 121.4 12% 58.2 7% 341.2 9%
ROW retail sales 157.8 4% 78.2 17% 169.5 14% 91.9 22% 497.4 12%
International
retail sales 547.2 12% 252.6 11% 559.9 9% 304.6 16% 1,664.3 11%
----- ---- ----- ---- ----- ---- ----- ---- -------- ----
Total retail sales 895.0 13% 386.3 13% 894.0 11% 482.4 15% 2,657.7 13%
----- ---- ----- ---- ----- ---- ----- ---- -------- ----
Year ended 31 August 2018
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2017/18 YOY%
----- ----- ----- ----- ---------
UK retail sales 300.9 23% 113.6 17% 288.0 23% 158.8 29% 861.3 23%
EU retail sales 235.2 42% 113.9 37% 257.4 31% 132.6 34% 739.1 36%
US retail sales 102.4 24% 46.6 12% 108.1 15% 54.5 27% 311.6 19%
ROW retail sales 151.9 34% 66.8 8% 149.2 11% 75.3 20% 443.2 19%
International
retail sales 489.5 35% 227.3 22% 514.7 21% 262.4 28% 1,493.9 27%
----- ---- ----- ---- ----- ---- ----- ---- --------- ----
Total retail sales 790.4 30% 340.9 20% 802.7 22% 421.2 29% 2,355.2 26%
----- ---- ----- ---- ----- ---- ----- ---- --------- ----
(1) Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: four months to 30 June
P4: two months to 31 August
Appendix 2 - Retail sales growth by period at constant
currency
Year ending 31 August 2020
2019/20
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% YTD YOY%
------- ----- ----- ----- --------
UK retail sales 408.9 18% 168.2 26% 329.2 (1%) 906.3 11%
EU retail sales 332.5 22% 155.6 24% 328.0 20% 816.1 22%
US retail sales 139.3 20% 63.3 33% 124.9 (2%) 327.5 13%
ROW retail sales 194.2 23% 89.4 14% 201.2 18% 484.8 19%
International
retail sales 666.0 22% 308.3 23% 654.1 15% 1,628.4 19%
------- ---- ----- ---- ----- ---- ----- ---- -------- ----
Total retail
sales 1,074.9 20% 476.5 23% 983.3 9% 2,534.7 16%
------- ---- ----- ---- ----- ---- ----- ---- -------- ----
Year ended 31 August 2019
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2018/19 YOY%
----- ----- ----- ----- --------
UK retail sales 347.8 16% 133.7 18% 334.1 16% 177.8 12% 993.4 15%
EU retail sales 275.9 13% 126.3 7% 269.0 3% 154.5 16% 825.7 9%
US retail sales 113.5 8% 48.1 (4%) 121.4 6% 58.2 2% 341.2 4%
ROW retail sales 157.8 5% 78.2 18% 169.5 16% 91.9 24% 497.4 14%
International
retail sales 547.2 9% 252.6 8% 559.9 8% 304.6 15% 1,664.3 10%
----- ---- ----- ---- ----- ---- ----- ---- -------- ----
Total retail sales 895.0 12% 386.3 11% 894.0 11% 482.4 14% 2,657.7 12%
----- ---- ----- ---- ----- ---- ----- ---- -------- ----
Year ended 31 August 2018
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2017/18 YOY%
----- ----- ----- ----- ---------
UK retail sales 300.9 23% 113.6 17% 288.0 23% 158.8 29% 861.3 23%
EU retail sales 235.2 34% 113.9 29% 257.4 23% 132.6 24% 739.1 28%
US retail sales 102.4 28% 46.6 23% 108.1 22% 54.5 29% 311.6 25%
ROW retail sales 151.9 32% 66.8 7% 149.2 11% 75.3 18% 443.2 18%
International
retail sales 489.5 32% 227.3 20% 514.7 19% 262.4 23% 1,493.9 24%
----- ---- ----- ---- ----- ---- ----- ---- --------- ----
Total retail sales 790.4 28% 340.9 19% 802.7 21% 421.2 26% 2,355.2 24%
----- ---- ----- ---- ----- ---- ----- ---- --------- ----
(1) Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: four months to 30 June
P4: two months to 31 August
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END
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