Asos underlying profits surge, FY guidance reiterated

(Sharecast News) - Asos shares shot higher on Wednesday after the online fashion retailer reported a circa 50% jump in first-half underlying profit and backed its guidance for the year. In a trading update for the first six months of the year, Asos said adjusted earnings before interest, tax, depreciation and amortisation rose circa 50% year-on-year. This was driven by improved adjusted gross margin - which increased 330 basis points to 48.5% - a lower returns rate and continued cost discipline.

The improvement in the gross margin demonstrates "the continued success from deployment of the new commercial model and ongoing expansion of the Flexible Fulfilment model," Asos said.

Gross merchandise value (GMV) fell 9% on the year, but there was a sequential quarterly improvement in the first and second quarters. Improvements were delivered across the core markets of the UK, US, Germany and France, and categories where initiatives were concentrated.

The company reiterated full-year guidance for adjusted EBITDA of £150m to £180m and for GMV to show an improving trajectory throughout the year, 3 to 4 percentage points ahead of revenue.

Chief executive Jose Antonio Ramos Calamonte said: "Our first half shows continued progress on executing our strategic priorities across relevant fashion product, inspirational shopping experience and an efficient operating model. The result has been a circa 50% YoY increase in underlying profitability.

"The enhancements we have made to the customer experience, including our revitalised app, are helping people to find not just items, but outfits, styled just for them. We are seeing improvements in new customer growth and strong performance in our womenswear business, both of which are encouraging lead indicators for sales growth. With an accelerated cadence of initiatives still to come this year, we are well positioned to deliver further improvements for customers and the business as our focus remains on sustainable, profitable growth."

At 0915 GMT, Asos shares were 15.6% higher at 245p.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said that with full‑year cash profit guidance reiterated and new customer growth ticking up across key markets, "there are early signs that efforts to clean up inventory and refocus on customer engagement could be laying the groundwork for a more sustainable recovery".

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