Asos cheers City with second profit upgrade in a month

Asos has upgraded profit expectations for the second time in just over a month, saying sales had been stronger than predicted and shoppers are returning fewer items.

Shares in the online specialist rose 6% on Wednesday morning to £44.74 as it said sales were expected to rise by between 17% and 19% in the year to the end of August, more than the 15% expected by analysts, while profits would be £130m -£150m, more than double the average £58m pencilled in by the City.

The latest upgrade comes a month after Asos said it would hit the top end of profit expectations because of a surge in demand for casual and sporty clothing during lockdown.

Asos said the increasing popularity of beauty products and less fitted clothing, such as jogging pants and sweatshirts, has also led to fewer unwanted items being returned, helping to boost profits.

Online fashion retailers initially saw a slump in demand during the coronavirus crisis as shoppers stayed home and events for dressing up were cancelled. There were also concerns about conditions in distribution centres and factories at the height of the pandemic.

But after high street stores closed at the end of March, shoppers switched to buying from their screens to stock up on comfy lockdown clothing, beauty treatments and summer kit.

UK sales of clothing via the internet surged nearly 56% in the month to 3 May and around 70% in the following two months after an 8% dip in the four weeks to 5 April according to market analysts Kantar.

Asos said the consumer and economic outlook remained uncertain and the strength of its sales and profits performance would depend on how customer shopping behaviour changed in the longer term.

“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,” the company said.

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