Asos raises profit guidance and gets a grip on returns

Asos said today (12 August) that revenue and profit will be higher than expected for its full year after “stronger than anticipated underlying demand”.

In a pre-close trading update, the online fashion house said revenue growth is now expected to be between 17% and 19% year-on-year with profit before tax set to be in the region of £130 million-£150 million.

The e-tailer also again talked up the “beneficial returns profile”, it highlighted in its last trading statement. Despite industry fears of a deluge of online fashion returns once the coronavirus-enforced lockdown eased, Asos – for one – has not experienced returns rates at the pace it had previously predicted.

Like many other retailers, Asos extended its returns window for unwanted products, giving customers 90 days to send back such items.

“We had expected to see underlying returns normalise once lockdown measures eased and customers were both able to ship returns and felt more comfortable doing so,” it said.

“However, in recent weeks, we have gained better visibility on this pattern in customer behaviour as we have progressed through the returns cycle and it has become evident that returns are not increasing at the rate we originally anticipated.”

Asos described “a significant and sustained reduction in returns rates since April”, which it accredited to customer demand for 'lockdown' categories, such as activewear and face & body.

It also said returns rates have been further suppressed below estimated levels by “a prolonged shift in customer behaviour towards more deliberate purchasing across all product categories, even when sales momentum has improved”.

On the day the UK fell into recession, Asos expressed caution about the current state of the economy – and said the extent of its better-than-expected performance beyond this financial year will be driven by how customer shopping behaviour normalises in the wake of the coronavirus.

“The second half has been a period of tremendous change for Asos, we have made real progress and shown resilience through the period and are exiting the year in a strong position,” said the company statement.

“We have a robust balance sheet, with a differentiated product offer and global infrastructure to leverage.”