Strong sales during lockdown and fewer returns have helped profits surge at Asos (ASC.L).
The online fashion retailer said on Wednesday that pre-tax profit in the year to 31 August rose 329% to £142.1m ($182m).
Asos said the jump in profits — which was ahead of forecasts — was driven by improvements in the underlying efficiency of the business and a decline in returns, which offset rising costs due to COVID-19.
“Last year the company made heavy investment into IT and spent significant amounts sorting out operational problems at its warehouses, which ate into profits,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.
“But that spending meant the company was in a much better position to profit from the lockdown shopping surge.”
Revenue rose 19% in the period to £3.26bn. Asos recorded double digit percentage sales growth in all its markets and signed up 3.1m new customers during the year.
“After a record first half which saw us make progress in addressing the performance issues of the previous financial year, the second half will always be defined by our response to Covid-19,” chief executive Nick Beighton said in a statement.
“I am proud of the way Asos met this challenge head on, putting our duty to act as a responsible business at the heart of our approach and working to balance our performance in that context.
“As well as protecting staff, suppliers and customers, we've driven efficiency and have emerged a stronger, more resilient and agile business whilst delivering strong profit and cash generation.”
Sherri Malek, an analyst at RBC Capital Markets, said Asos’s performance was “impressive.”
Asos struck a more cautious tone when it came to future trading. The company said it was “well-set for peak trading” over Christmas but was “retaining caution... whilst economic prospects and lifestyles of 20-somethings remain disrupted.”
“With venues forced to close at 10pm and the Christmas party season cancelled, profits from party wear will be thin,” Streeter said.
“Job prospects are uncertain for its core group of customers in their 20s and so the company will have to be very choosy about the ranges and prices it offers to maintain demand and stop returns being a major headache once again.”
Shares in Asos fell 5% at the open.
“The shares have had a good run into these results – up 16% over the last month and up 70% over the last three months,” Greg Lawless and Clive Black, retail analysts at Shore Capital, wrote in a note. “Given the share price run, high valuation metrics and an uncertain consumer outlook, the shares look up with events.”
WATCH: What is a V-shaped economic recovery?