ASOS share price rallies despite profits plunging 87% after challenging year
The online fashion retailer recorded a major decline in profits in its half-year results on Wednesday due to a large capex programme which has given analysts a reason to be optimistic about its future.
ASOS saw its profits drop 87% to £4 million in the six months to February 28 compared to the same period in 2018 due to a major investment programme aimed at securing growth for the ailing online retailer.
The company is nearing the end of its capital expenditure programme (capex), which involved significant disruption and transition costs, but has providing the business with increased confidence that it continue to capture market share and restore profitability over the long-term, ASOS said.
The capex programme, which ASOS plans to wind down next year, added £22 million in extra costs in its first six months of trading for this financial year, but has helped the company increase its revenue and retail sales by 14% and 13% respectively.
ASOS results: key figures
ASOS saw UK sales rise by 16%, while international sales increased by 12% over the last six months of trading and despite the company suffering a major decline in profit it was able to keep its full-year guidance left unchanged, with EBIT forecast at circa 15% and EBIT margin of circa 2%.
ASOS CEO Nick Beighton admitted that despite increasing its sales by 14% in an increasingly competitive market, the business is ‘capable of a lot more’.
‘We have identified a number of things we can do better and are taking action accordingly,’ he said. ‘We are confident of an improved performance in the second half and are not changing our guidance for the year.’
ASOS invests for its future
The global online fashion market is worth more than £220 billion, with ASOS investing heavily in its business to ensure that it can capture a significant share of it.
‘We now have the tech platform, the infrastructure, a constant conversation with our growing customer base who love our own great product and the constantly evolving edit of brands we present to them,’ Beighton added.
‘We believe that ultimately there will only be a handful of companies with truly global scale in this market. We are determined that ASOS will be one of them,’ he added.
The combination of the retailer’s ongoing investment and strong market position that has helped its share price rally close to 10% on Wednesday, despite the business recording a 87% decline in earnings.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
![](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/ContentImage/img4.jpg/jcr:content/renditions/original-size.webp)
See an opportunity to trade?
Go long or short on more than 17,000 markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only