Comment: UK growth bodes well for Asos

Global fashion powerhouse Asos is really leading the etail pack. Yes, the business has been at the top of its game for a while now, but its first-quarter trading update on Tuesday showed that it is still firing on all cylinders.

Much has been made of Asos’ international prowess over the past few years and some critics warned that this is the only area of growth for the retailer in the future, as the UK market reached maturity. 

UK sales growth had slowed in recent months, but in its first quarter it showed healthy levels, with growth up 24% to £62m. Gross margins took a hit due to difficult comparatives but the fact that Asos has delivered such buoyant sales in a mature market is testament to the retailer’s innovation.

Boss Nick Robertson said the retailer had “turned a corner” in the UK and has proved its critics wrong. He said that when commentators had talked about saturation in the UK, for him it was like “a red flag to a bull”.

Robertson’s response was to invest in price to ensure Asos has enough entry price point product to continue to fulfil the aspirations of its core customers. Asos has witnessed the massive growth of value fashion player Primark, which has outperformed the market for some time, and it needed to ensure its core customers did not need to shop anywhere else.

Broker Panmure Gordon points out that the UK online clothing market is one of the most mature in the world. It said it is growing at mid-teen rates, meaning it is more mature than most other markets, even of close peers such as Germany, Spain and France. Yet, the broker says, if Asos can grow sales 24% in this market, it bodes “extremely well for Asos in virtually all of its markets”.

Outside of the UK, Asos continues to deliver, and in October next year it will launch a site in perhaps the most exciting international market at the moment, China. Even without a dedicated site yet in China, the country is already in Asos’ top six markets. And growth there will propel the etail giant to the next level.