Asos to beat expectations as customers return fewer clothes

Fashion giant Asos has said its customers are still being more careful about what they buy to avoid sending clothes back – pushing the online retailer to beat market expectations.

Bosses said returns are still low, after being reduced during lockdown, and are not increasing as fast as it had feared.

“We had expected to see underlying returns normalise once lockdown measures eased and customers were both able to ship returns and felt more comfortable doing so,” Asos said in a statement to shareholders on Wednesday morning.

“However, in recent weeks, we have gained better visibility on this pattern in customer behaviour as we have progressed through the returns cycle, and it has become evident that returns are not increasing at the rate we originally anticipated.”

Part of the reason people are returning fewer items to the company is because they have changed what they buy on the site. Items such as activewear and mascara are less likely to be sent back in normal times.

However, there has also been a “prolonged shift in customer behaviour towards more deliberate purchasing”, Asos said.

Profit before tax is now likely to be between £130 million and £150 million for the full year, up from £33.1 million the year before.

The company also expects revenue to grow between 17% and 19%, ahead of market expectations.

Experts were predicting that revenue would be up 15.1% while profit before tax would reach £58 million.

Shares jumped 9.5% on the news.

Asos said the economic outlook is uncertain and it is “unclear how long the current favourable shopping behaviour will persist”.

“The second half has been a period of tremendous change for Asos; we have made real progress and shown resilience through the period and are exiting the year in a strong position.”

Liberum analyst Adam Tomlinson said the 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.

He 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.”