Sunday 19 August 2018

Asos shares hit by investor fears over spending plans

Investors were spooked at the group’s proposals to spend up to £250 million on boosting its infrastructure to support sales growth.

Shares in online fashion firm Asos have slumped as worries over higher-than-expected spending plans overshadowed surging half-year profits.
Shares in online fashion firm Asos have slumped as worries over higher-than-expected spending plans overshadowed surging half-year profits.

By Holly Williams, Press Association Deputy City Editor

Shares in online fashion firm Asos have slumped as worries over higher-than-expected spending plans overshadowed surging half-year profits.

The group saw its shares tumble as much as 12% at one stage despite reporting a 10% rise in pre-tax profits to £29.9 million for the six months to February 28.

Investors baulked at the group’s plans to spend up to £250 million boosting its infrastructure to support sales growth.

The firm upped its spending guidance for the full-year for the second time in less than three months, now expecting capital expenditure of between £230 million and £250 million.

But results showed robust trading over its first half, with UK retail sales up 22% to £414.5 million, while international sales lifted 28% to £716.8 million on a constant currency basis.

The group added that it notched up its highest number of website visits over the half year – at over a billion.

Chief executive Nick Beighton said: “These results show strong trading at the same time as we are making substantial investment in our future.

“Alongside our investment in our people and our technology, we are accelerating investment in our distribution and logistics, laying the foundation for £4 billion of net sales.”

The group kept its guidance for full-year sales growth of between 25% and 30%.

But analysts said the investment plans caused concern and highlighted the costs faced by online retailers.

Russ Mould, investment director at AJ Bell, said: “This offers a reminder that, although not burdened with the same level of overheads as traditional retailers, it does incur material costs on items like distribution and logistics.”

Asos has spent just over £95 million so far this year, with around half on technology and transformation programmes and the remainder on infrastructure across its supply chain and head office.

But it insisted the heavy investment was bearing fruit, with shopper visits to its site up by 25% year-on-year, average orders up 8% and a 2% rise in the average basket size.

The group insisted it was “confident that by concentrating on successfully executing our investments, we are positioning Asos to be the world’s number one destination for fashion-loving 20-somethings”.

Press Association

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