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Asos sales surge during lockdown thanks to casual and active wear Asos considers action against Leicester supplier in ethical audit
(about 8 hours later)
Online fashion retailer expects profits at top end of forecasts amid strong growth overseas Boss of online fashion retailer says factory tagged as ‘red critical’ in last few months
Asos expects profits to hit the top end of market expectations this year after the online fashion retailer’s sales of casual and active wear surged during the coronavirus lockdown. Asos is considering action against a Leicester supplier after finding the UK factory to be in breach of its ethical trading standards during the coronavirus outbreak.
The company, which targets the “20-something” fashion market, reported a 10% year-on-year sales rise to just over £1bn in the year to the end of June. Asos said its customer base grew by 6% to 23 million during the lockdown, with particularly strong growth in new international customers. Nick Beighton, the online fashion retailer’s chief executive, said one factory had been tagged as “red critical” in the last few months under Asos’s ethical audit process – flagging the need for urgent action over potential risks to workers or gaps in management systems. Beighton said Asos’s ethical team had been active throughout the UK’s coronavirus lockdown.
Asos, which will repay its furlough support from the UK government, said sales initially fell by up to a fifth when lockdown measures were introduced in March. Asos works with about 30 factories in the UK, most of which are in Leicester, but supply less than 2% of its products. But the visit by Asos’s top management shows heightened concern about conditions at UK garment factories after a recent critical report by workers’ rights group Labour Behind the Label and allegations of malpractice at suppliers to Boohoo and Quiz.
The company said the rebound in sales had come from a combination of growth in new customers and sales of “lockdown” product categories, such as casualwear and activewear. Asos said that while it had shifted its model to try to deliver these products, “customer demand for key ‘lockdown’ category product has outstripped supply” with sales growth of 50%. Beighton said its unnamed Leicester factory had been visited by executives last week and he would be visiting again on Friday before “making a decision accordingly” about its future relationship with Asos.
The company said it had recorded a decline in sales in “event-led” categories, including occasionwear such as dresses and formalwear, because of workers staying at home and the shutting of restaurants, clubs and bars. He said Asos would go through its established process for dealing with troubled suppliers, which involves laying out a plan to improve standards and then regularly checking progress. Factories that fail to improve conditions after an agreed period are dropped.
The company said that despite the impact of Covid-19 it expects pre-tax profits this year to be “towards the top end of market expectations”. Beighton said the visit was part of normal working practice at Asos, and that the company has thorough measures in place to prevent malpractice in its supply chain.
Nick Beighton, the Asos chief executive, said: “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. These include training buyers to check whether a factory can meet the order without outsourcing to unapproved suppliers, publishing a full list of factories and running a phone line for whistleblowers in the supply chain. Beighton said Asos was considering whether to publish its regular audit results.
“Our performance shows that we are delivering against this aim despite the tough economic and social backdrop. We have learned a lot and adapted quickly. 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 cashflow for the full year.” “We believe in transparency. It demonstrates control of the supply chain,” he said.
Beighton said Asos was concerned about the potential effect on the whole online fast-fashion industry of allegations of malpractice in Leicester factories supplying Boohoo and Quiz which have emerged in recent weeks. Asos said none of the Leicester factories it used also supply Boohoo.
His comments came as Asos said that profits would hit the top end of market expectations this year after the online fashion retailer’s sales of casual and active wear surged during the coronavirus lockdown.
The company, which targets the “20-something” fashion market, reported a 10% year-on-year sales rise to just over £1bn in the year to the end of June. Asos said it attracted 6% more shoppers during the lockdown taking its total to 23 million, with particularly strong growth in new international customers.
Asos will repay furlough support which it initially claimed from the UK government for April. While sales at the group fell by up to a fifth when lockdown measures were introduced in March, they have since recovered.
Beighton said: “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.”