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Asos: Sports gear and face cream sales boom as lockdown eases Asos: Shoppers are returning fewer items after lockdown
(about 2 hours later)
Online fashion retailer Asos has said "stronger than anticipated" demand for its clothes has continued even as High Street rivals reopened after lockdown. Customers are sending back fewer items than expected as lockdown eases, Asos has said, as it forecast bumper revenues for this year.
Sports gear and face creams had continued to sell well, it said. The online fashion retailer said people were making more "deliberate purchases" rather than ordering and returning several items at a time.
And customers had not been returning items at anything like the rate Asos was expecting, it said in a statement. Sales of make-up and sportswear had been particularly strong as people were stuck at home, it said.
As a result, Asos said sales and profits this year would be better than expected, sending the share price more than 10% higher in early trading. This was as seasonal clothes such as summer dresses did less well.
The online fashion platform is one of the few firms to have benefitted as Covid-19 dealt a body blow to UK retail.
It has adapted quickly to changing shopping habits in lockdown and said demand for its clothes had been "stronger than anticipated", even as High Street rivals had reopened.
As a result, the firm said sales this year could be up by as much as 19% compared to last year.
Like other online players, Asos has struggled with large volumes of returns in the past and even threatened to block serial returners in 2019.
But while it had expected return rates to revert back to a more normal level after lockdown eased, they had remained low, it said.
It added that it had reacted quickly to offer more leisure and sports clothes and cosmetics, as interaction outside the home was drastically reduced.
This, it said, had helped offset a fall in sales of summer dresses, holiday and wedding wear that usually sell well in spring.
'Quick response'
The retailer now forecasts revenue growth of 17% to 19% for this financial year, with pre-tax profits now expected to be in the range of £130m to £150m.The retailer now forecasts revenue growth of 17% to 19% for this financial year, with pre-tax profits now expected to be in the range of £130m to £150m.
In its trading update, Asos said people had been sending back fewer items during lockdown and it had expected return rates to increase after restrictions were lifted. But this had not happened. Sofie Willmott, analyst at GlobalData said Asos was taking market share from competitors, with the rest of the UK's clothing and footwear sector set to decline 28% in 2020.
"As a result, we have seen a significant and sustained reduction in returns rates since April," Asos said. "Agile ASOS has benefitted from its quick response to the pandemic, pivoting its product offer and reaping the rewards," she said. "Without the hindrance of physical locations, Asos has been able to focus on marketing and stocking its most relevant lockdown products such as sportswear, loungewear and beauty."
This is part reflects demand for so-called "lockdown categories" such as sports and leisurewear, and customers indulging themselves with things like face creams and make up. However she predicted that as life returned to normal next year the firm's "young, tech-savvy customers" would return to their previous habits, returning a higher proportion of the items they order.
Asos said the lower return rates were also down because of "a prolonged shift in customer behaviour towards more deliberate purchasing across all product categories, even when sales momentum has improved". The firm also included a note of caution, reflecting the wider retail climate. "Looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist," Asos said.
However, there was a note of caution. "Looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist," Asos said.
Last month, Asos said it would repay cash to the government it claimed for furloughing workers.
Liberum analyst Adam Tomlinson said Wednesday's news comes a day after Zalando reported a high single-digit percentage decrease in return rates.
"A key driver of (Asos's) better profit outturn for the year is that return rates are better than expected, which is consistent with what Zalando said yesterday," he said.
Mr Tomlinson added: "While Zalando expects return rates to revert back to pre-Covid levels, Asos are not seeing this dynamic play out at the rate they were expecting."