Britain’s ongoing lockdown is boosting profits at ASOS (ASC.L) despite rising costs, as the pandemic pushes more shopping online and leads to lower return rates.
ASOS said on Wednesday that ongoing restrictions to curb the spread of COVID-19 were likely to add net £40m ($54.7m) to its bottom line in the first half of 2021. The boost comes as more customers spend more online and return rates fall, ASOS said.
“The pandemic may have wreaked devastation on retailers with a large brick and mortar footprint, but it’s given ASOS, with its highly flexible e-commerce platform, another big shot of success,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.
The surprise profit upgrade came as fast fashion retailer ASOS reported better-than-expected performance over Christmas and New Year.
Sales grew by 24% to £1.36bn in the four months to 31 December and ASOS added 1.1 million new customers over the period.
The performance was driven by a 36% jump in UK sales, which rose to £554.1m. More spending was driven online during the period as lockdown restrictions returned in November.
WATCH: ASOS warns of £15m hit from Brexit costs after 'strong' Christmas
“We are really pleased with the strong performance we have delivered, which is testament to both the strength of our multi-brand model and the hard work of our people,” chief executive Nick Beighton said.
“We have continued to execute well and deliver for our customers, whilst investing into growing our business and driving further efficiency through a strong operational grip.”
ASOS left its full-year sales forecasts unchanged but said profits for the year were likely to be “at the top end of current market expectations,” suggesting the online retailer could report profits close to £170m for the year.
“Looking forward, given the uncertainty associated with the virus and the impact on customers’ lives, our cautious outlook for the second half of the year remains unchanged,” Beighton said. “However, the strength of our performance gives us confidence in our continued progress towards capturing the global opportunity ahead.”
ASOS shares rose 3.7% in early trade in London.
“As a pure-play operator, the company has shown agility to pivot towards activewear and has clearly benefited from the closure of non-essential stores during peak trading in November and December, winning new customers,” Greg Lawless and Clive Black, retail analysts at Shore Capital, wrote in an investment note. “The trick will be to make these sticky given the structural shift online in 2020.”
While COVID-19 restrictions are providing a boost, ASOS warned that new Brexit “country of origin” rules were likely to add £15m to its costs this year.
WATCH: Will interest rates stay low forever?