Lower returns help send Asos shares soaring

The online fast fashion giant expects to make annual profits of up to £150m – more than double the forecast by analysts

Stylist Laila Hamidi wears an Asos dress  Credit: Streetstyleograph/Getty Images

Shoppers continued to snap up clothes from online seller Asos even after stores were reopened by its bricks and mortar rivals, triggering a jump in sales and profits. 

The surging demand could propel annual pre-tax profits at the fast-fashion firm to £150m, bosses said, driven by revenues almost a fifth higher than in 2019.

Asos was boosted by customers sending back fewer clothes than expected. It said shoppers are increasingly making careful decisions about what they buy, rather than ordering several different items to try on and returning the ones they do not like. This appears to be a longer-term shift in behaviour than first forecast.

The company said: "We had expected to see underlying returns normalise once lockdown measures eased and customers were both able to ship returns and felt more comfortable doing so.

"However... it has become evident that returns are not increasing at the rate we originally anticipated."

The bullish update comes after consumers bought more sportswear and beauty products in lockdown. 

Shares jumped 8pc to £46.46. They have posted a remarkable recovery since falling to almost £10 in mid-March as Covid hit. Asos is now worth almost £4.5bn - more than rival Boohoo, which has been fending off claims of "sweatshop" conditions in its supply chain. Boohoo denies the allegations.

Online fashion sales have boomed since the beginning of lockdown to £1.3bn in June from £636m in March, figures from Kantar showed.

Offline fashion has lost significant ground after bricks and mortar branches were forced to shut for almost three months.

Despite striking an upbeat tone, Asos warned that the economic outlook remains uncertain.

It said: "The extent of this outperformance and any impact beyond this financial year will be driven by how customer shopping behaviour normalises."

Analysts at Peel Hunt had previously forecast annual pre-tax profit of just £69m and said the update was extremely impressive. 

They said: "The shares have done well but are likely to challenge our £50 price target in the upcoming sessions."

Last week, Asos demanded greater transparency from third-party brands in the wake of a wave of concerns over unethical treatment of workers across the industry.

The company asked its partners to sign a pledge to make their manufacturing sites public, ensure they know the identity of all their suppliers and give details of any supply chain risks.

The Telegraph revealed in July that Asos had ended contracts with several clothing suppliers over the past couple of years after it uncovered possible serious threats to workers' health, safety or human rights.