Revenue Goes Up, but Gross Margin Falls

ASOS, the British-based global online fashion pure play, reported that total group revenue was up 23% (27% on a constant-exchange-rate basis) for the four months through December 31, 2015. Total retail sales during the period grew by 22% (27% on a constant-exchange-rate basis). However, the company’s retail gross margin fell by about 40 basis points

Source: Company reports

Sales in the US and the EU Led the Growth

ASOS’s results during the period were driven by healthy growth in retail sales in the company’s core international markets. Retail sales in the US were up by 42% (35% on a constant-exchange-rate basis) and were up by 29% in the EU (40% on a constant-exchange-rate basis). In the UK, retail sales were up 25%. Nick Beighton, ASOS’s CEO, commented that the growth in international retail sales was underpinned by continued price investment and the further rollout of the company’s zonal pricing strategy, which allowed the retailer to charge different prices country by country. While the implementation of the zonal pricing strategy made the company more responsive to currency fluctuations, which was reflected in strong international sales, it also affected the company’s retail gross margin, which fell by about 40 basis points over the period. Beighton commented that revenue growth during the period was also sustained by record sales during the Cyber Monday weekend in late November and by growth in average basket value, number and frequency of orders. The number of active customers worldwide grew by 8% year over year, to 10.7 million, as of December 31, 2015.

Committed to Its Core Markets

ASOS remains committed to expanding in its core markets of France, Germany and the US, as well as in the UK, its domestic market. In December, the company began construction on a warehouse facility, EuroHub 2, just outside Berlin, which shows how the EU market is becoming central to ASOS’s strategic expansion and that the company is determined to compete with the likes of German online fashion retailer Zalando.