ASOS upgrades sales and profit outlook on strong demand, fewer returns

LONDON (Reuters) - British online fashion retailer ASOS ASOS.L forecast full-year sales and profit significantly ahead of market expectations, saying it was benefiting from stronger than anticipated underlying demand and fewer products being returned by shoppers.

FILE PHOTO: A model walks on an in-house catwalk at the ASOS headquarters in London April 1, 2014. REUTERS/Suzanne Plunkett

Shares in ASOS were up 8.5% at 0734 GMT on Wednesday, extending gains in 2020 to 36% after it said revenue growth for its 2019-20 year was now expected to be between 17% and 19%.

It forecast pretax profit in the region of 130 million pounds to 150 million pounds ($170-$196 million), up from 33.1 million in 2018-19.

Several British clothing retailers, including Next NXT.L and Superdry SDRY.L, have recently reported better than expected trading as Britain emerged from coronavirus lockdown.

ASOS, whose fast fashions are popular with shoppers in their twenties, said it had expected to see return levels normalise once lockdown measures eased and customers were able to ship returns and felt more comfortable doing so.

However, it said returns were not increasing at the rate it had anticipated due to strong demand during the lockdown for activewear and a shift to more intentional purchasing across all ranges.

German online fashion retailer Zalando ZALG.DE said on Tuesday it had also benefitted from a decline in returns, though it assumes the fall will be temporary.

“Looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist,” ASOS said.

Last month ASOS said it would repay the money it claimed under Britain’s scheme to furlough workers during the crisis.

In April it raised 247 million pounds in new equity to shore up its finances.

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Reporting by James Davey; editing by Kate Holton and Sarah Young