Asos expected to shrug off sales woes with hike in annual profits

Online fashion firm Asos is set to unveil another double digit hike in annual profits on Wednesday despite spooking investors with a recent warning over sales.

The group has seen shares plummet since July, when it alerted that annual sales growth will be at the lower end of market forecasts after missing targets.

Asos said sales fell short of expectations because it was “managing demand” while setting up various warehouse and distribution projects.

ASOS chief executive
ASOS chief executive

Despite assurances that profits remained on track with forecasts, the stock tumbled on the day and is now down 30% over the past six months.

Investors had already baulked at the firm’s spending plans, after Asos upped its spending guidance for the full-year for the second time in less than three months in April.

But retail experts are expecting a reassuring set of full-year figures from Asos, which is due to show underlying pre-tax profits rising by 20% to £100.3 million.

Comments on its recent performance will also be eyed closely given the sharp contrast in weather, with a cold snap a year ago boosting sales.

Greg Lawless, an analyst at Shore Capital, said: “September has been tougher in the UK for many retailers, as a result of the comparatives from last year, when the UK experienced a cold snap, which brought forward full-price autumn/winter ranges.

“We highlight that Asos is now more of an international story with the UK division only accounting for 37% of revenues, so becoming relatively waterproof.”

Its investment plans are also future-proofing the business, according to experts.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the firm is still a “force to be reckoned with”.

“While it’s good to see Asos investing in the future, we’ll be looking out for any further unscheduled upticks here,” he added.

Asos – which stands for As Seen On Screen – is setting up new warehouse operations in east Berlin and Atlanta, Georgia.

The warehouse in Berlin, the so-called Eurohub 2 distribution centre, was damaged in a fire last year.

Mr Lawless said: “In our view, Asos remains a structural winner given the shift online together with its global aspirations and the opportunity to leverage the overseas investments in distribution capacity.”

Asos also has corporate heavyweight Adam Crozier – the former boss of ITV and Royal Mail – on board as its next chairman.

He is also chairman at Whitbread, the firm behind Costa Coffee and Premier Inn, and will succeed Brian McBride at Asos when he steps down on November 29.