Margin decline hits H1 profits at Asos but results beat forecasts

1st Apr 2015 07:15

Asos saw profits fall by a tenth in the first half as a sharp drop in margins outweighed a strong sales performance, though results were better than analysts had predicted.Pre-tax profit for the six months to 28 February was down 10% at £18.04m but the online fashion retailer believes momentum is building from its recent investments in price cuts and so-called 'zonal pricing'. Analysts were expecting a figure closer to £16.3m.Earnings per share were down 5% at 17.6p, ahead of the 15.6p consensus forecast.The launch of the group's zonal pricing capability - which gives protection against FX movements by enabling it to set localised prices dependent on local conditions - and planned investment in international prices resulted in a retail gross margin decline of 270 basis points to 46.8%.A 44% increase in warehousing costs to £50.06m also weighed on the bottom line.However, the impact was mitigated by a £6.3m insurance payout following a fire at its Barnsley warehouse last June. Proceeds have been reinvested in the international pricing proposition, Asos said."With our continued investment in our international price competitiveness gaining traction, momentum in the business is building. This gives us confidence in the outlook for the second half and that full-year profit and margin will be in line with expectations," said chief executive Nick Robertson.First-half revenues increased 14% year-on-year to £550.47m, helped by a record Christmas and a strong pick-up in growth in the second quarter.Active customer numbers increased 13% to 9.3m. Robertson said Asos's "customer engagement remains high, with growth in visits, average order frequency, average basket size and conversion all improving".The stock was up 4.4% at 3,789p by 08:19.