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Asos boosted by sports clothing and beauty sales

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
ASOS said business was driven by continued strong demand among customers and a fall in return rates, which lowered its costs. Photo: PA
ASOS said business was driven by continued strong demand among customers and a fall in return rates, which lowered its costs. Photo: PA

Shares in Asos (ASC.L) surged after the online retailer said a shift in shopping habits among customers had delivered an unexpected boost to its business.

In an unplanned trading update on Wednesday, Asos said sales and profits for its financial year were now expected to be “significantly ahead of market expectations.”

The retailer said the upgrade was driven by continued strong demand among customers and a fall in return rates, which lowered its costs.

Asos said lower returns were driven by demand for activewear and its “face + body” beauty and personal care products. Both categories typically have lower return rates than other categories.

READ MORE: Coronavirus lockdowns turbo-boost sales at Europe’s largest fashion platform

The statement comes a day after German online fashion rival Zalando (ZAL.DE) reported a similar dynamic. Zalando said second quarter sales accelerated by 27%, driven in part by demand for leisure clothes, sports clothes, and beauty products.

Asos said it was also benefitting from “a prolonged shift in customer behaviour towards more deliberate purchasing across all product categories,” which led to lower returns.

Revenues are now forecast to grow by between 17% and 19% for the full-year. Pre-tax profit is expected to fall in the £130m ($170m) and £150m range.

Analysts had expected revenues to grow by around 15% this year and had pencilled in a profit of only around £50m.

“It is only a month since Asos issued an update for the 4 months to June 30th, with cumulative sales growth running at 16%,” said independent retail analyst Nick Bubb. “July and August so far must have been very strong.”

READ MORE: A third of Brits are shopping more online now than during lockdown

Asos said: “The consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist.

But it added: “We have increased confidence that ASOS will continue to progress as one of the few truly global leaders in fashion retail.”

Shares jumped over 10% at the open.