ASOS in fashion as it upgrades profit forecasts following stronger demand

The online fashion firm's revenue growth for the full year is now expected to be between 17%-19% with pre-tax profit in the region of £130mln-£150mln

ASOS PLC - ASOS expects profits to be significantly ahead of forecasts following stronger demand

ASOS PLC (LON:ASC) said that sales and profits for its full-year are now expected to be “significantly ahead of market expectations” due to “stronger than anticipated underlying demand” for its clothing lines.

In a trading update, the online fashion giant said revenue growth for the full year is now expected to be between 17%-19% with pre-tax profit in the region of £130mln-£150mln.

READ: ASOS to pay back furlough money amid strong profit expectations

The company also said it had seen a “significant and sustained reduction” in return rates since April, reflecting customer demand for ‘lockdown’ clothing categories such as activewear and face and body items. However, the firm said rates had been further suppressed below estimated levels by a shift in customer behaviour towards “more deliberate purchasing across all product categories”.

Looking ahead, ASOS said recent trading dynamics will delivery sales and pre-tax profits for its 2020 financial year that will be ahead of market expectations, however, the extent of the outperformance and any impact beyond the current year will be driven by how customer shopping behaviour normalised going forward.

“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. We have a robust balance sheet, with a differentiated product offer and global infrastructure to leverage. Against this backdrop we have increased confidence that ASOS will continue to progress as one of the few truly global leaders in fashion retail”, the company said in the statement.

In a note on Wednesday, analysts at Liberum placed their rating on ASOS under review from ‘sell’, saying the forecast upgrade meant they were required to re-appraise their outlook on the firm”.

Meanwhile, fellow broker Shore Capital reiterated their ‘hold’ rating on the stock, saying the company’s momentum and the opportunity to leverage its global infrastructure leaved it “well placed to fulfil its ambition to be a global leader in fashion”.

The upgraded forecast sent the shares up 5.4% to 4,447p in mid-morning trading.

--Adds broker comments and share price--


Quick facts: ASOS PLC

Price: 5358 GBX

Market: AIM
Market Cap: £5.35 billion

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