ASOS – Bad Weather And Covid Confusion Cuts Sales

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ASOS – Bad Weather And Covid Confusion Cuts Sales
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Underlying retail sales rose 20%, to £1.2bn in the third quarter, ignoring the effect of exchange rates. That includes growth in all regions except Rest of World.

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ASOS plc (LON:ASC) said COVID uncertainty and bad weather meant trading weakened in the last three weeks of the quarter. The group also warned that global supply chain issues, including freight capacity shortages and delivery delays, are set to continue.

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However, underlying pre-tax profit expectations for the full year are unchanged.

The shares fell 8.2% following the announcement.

ASOS' Sales Trends Weakened

Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown commented:

“Bad weather and ongoing uncertainty mean ASOS'  UK sales trends weakened towards the end of June. This is to be expected – if there’s any doubt about when so-called freedom-day is going to happen, its young, core customers will hold off on buying party dresses. Heavy rain means less socialising too. With restrictions set to ease in the coming days, we could see increased demand as people gear up to hit bars and clubs once more.

There is a lot resting on sales regaining some of the lost ground, with the market clearly disappointed in the uncertainty pointed out in ASOS’ trading statement. Next quarter will be crucial because it will give a better indication of the sales pace ASOS can achieve in more normal times. By that point there should be even more clarity on social activity, and a clearer view of the shape of ASOS’ future should come into focus. It’s possible that as customers become busier and not confined to their sofas, they’ll be scrolling the ASOS app less frequently, and therefore purchase less. What these different dynamics will mean for the numbers over the medium term is yet to be seen.

In some respects it looks like normality is already returning among ASOS customers though, with returns rates climbing back to pre-pandemic levels. That’s not the best news, although it’s not unexpected. It will likely mean some dents to operating margins in the near term.”


About Hargreaves Lansdown

Over 1.6 million clients trust us with £132.9 billion (as at 30 April 2021), making us the UK’s largest digital wealth management service. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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