UPDATE: Asos Invests GBP20M In New Warehouse To Drive Growth

9th Jun 2010 09:37

(Adds CEO comment, analyst comment, detail) By Hannah Benjamin Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Online fashion retailer Asos PLC (ASC.LN) Wednesday said it will invest GBP20 million in a state-of-the-art U.K. distribution center aimed at driving sales growth. "It should be more or less operational by mid-2011 and will help us in our aspiration to achieve GBP1 billion of sales in five years," Chief Executive Nick Robertson told Dow Jones Newswires Wednesday. The 1.2 million square feet warehouse located in Barnsley, South Yorkshire will have an initial capacity of up to GBP600 million of sales. It will replace Asos' existing site in Hemel Hempstead, Hertfordshire. Asos--whose sales climbed to GBP223 million for the fiscal year ended March 31 from GBP165 million a year earlier, largely on surging sales overseas--said the new facility is needed to accommodate its growth as it gets set to launch country-specific websites. Panmure Gordon analyst Jean Roche said the facility answers questions the market may have had about how the company would drive sales. International sales climbed 95% to GBP63 million in fiscal 2011 and now form just under a third of total group sales. Asos, whose fashions are targeted at 16 to 34-year-olds keen to replicate designer looks at a fraction of the price, is set to launch a U.S. website in September, with French and German websites following by the end of the calendar year. It also enjoys strong sales from Denmark, Australia and Ireland. For now, international despatches will continue to be made from its U.K. distribution hub. The company wouldn't say if it would replicate its free delivery and returns policy overseas, but CEO Robertson said the perks are a big draw and Asos will likely look to replicate the offer in as many territories as possible. He said returns would be managed through third-party agreements in specific territories. Asos' full-year pretax profit climbed 44% to GBP20.3 million from GBP14 million a year earlier. While profit continues to grow at a rate which dwarfs that of its peers, the growth has slowed from the 93% growth in profit in its fiscal 2009. Nonetheless, Asos expects online retail to continue outperforming traditional retail channels. It has enjoyed a strong start to the current fiscal year, in spite of ongoing pressures from the economic environment and high unemployment among young adults, with group retail sales in the nine weeks to June 6 up 58% on the year, driven by a more than doubling of international sales in the period. Gross margin, which fell to 41.8% in fiscal 2010 from 43.3% due to a shift in product mix, a rise in sourcing costs and an extra discount sale, has also recovered back to about 43%, CEO Robertson said. -By Hannah Benjamin, Dow Jones Newswires; 44-20-7842-9298; [email protected] (END) Dow Jones Newswires June 09, 2010 04:37 ET (08:37 GMT)