ASOS, the online fashion retailer, has reported strong sales growth over the year, but margins have come under severe pressure due to distribution costs.
The strain on margins may explain the market’s reaction early today – the ASOS share price mid-morning was down 12.67% to 2,428.65p.
The company reported sales growth of 22%, with the UK at 36% and strong growth in the US at 21%. Meanwhile, the EU and the Rest of World markets grew at 15% and 6% respectively.
Profits up, gross margin down
Adjusted profit before tax was £126.3m ($172.2m), up 30% on the prior year. However, gross margin was down by 200 basis points to 45.4%, driven by elevated freight and Brexit-related duty costs, product mix, FX headwinds and increased customer investment.
ASOS pointed to free cash flow generation of £35.9m and a net cash position of £199.5m.
Full-year 2022 sales growth is expected to be in the range of 10% and 15% with first-half revenue growth in mid-single digits. ASOS puts full-year 2022 adjusted profit before tax expectations in the range of £110m-£140m.
In addition to providing full-year figures, ASOS also announced changes at its leadership level today. Nick Beighton will step down as CEO, while Mat Dunn, CFO, will take on the additional role of chief operating officer (COO) and lead the business on a day-to-day basis.
The fashion firm’s boardroom shuffle will also see Katy Mecklenburgh, currently director of group finance, supporting as interim CFO. Ian Dyson will become chair, replacing Adam Crozier who previously announced his decision to step down.
Commenting on the latest figures, Mat Dunn, COO and CFO, said: “ASOS has delivered another strong performance, with continued growth in customer numbers driving further increases in sales and profits.”
He added: “Looking ahead, while our performance in the next 12 months is likely to be constrained by demand volatility and global supply chain and cost pressures, we are confident in our ability to capture the sizeable opportunities ahead.
“In the last two years, we have transformed ASOS with investment in infrastructure and the customer offer; we have generated strong revenue growth and free cash flow and improved structural profitability. But we know there is more to do and today we are setting out details of our ambitious plan to significantly increase ASOS’s sales and profitability becoming a £7bn business within three to four years.”