Stock Watch

Asos share price on trend as profits soar?

CMC Markets

Fashion retail has been one of the sectors hit hard by Covid-19, and online specialist Asos hasn’t been insulated from the impact of the pandemic. The Asos share price suffered an aggressive sell-off in February, bottoming out in the 1,000p region, as traders were spooked by the potential impact of the global pandemic and shutdowns.

However, Asos's share price has staged an impressive recovery. Shares began to rebound in April when the situation with the pandemic became clearer, before hitting a five-month high – and recouping all the pandemic-related losses – on the back of a bullish trading update. Asos shares have continued to rise since, currently sitting at 5,310p, just shy of its 52-week high.

Asos share price defies tough time for retail

This rebound is indicative of Asos’s performance over a turbulent few months for the sector, and the high expectations for the new set of numbers. Despite the impact of the pandemic on the fashion retail sector, things are looking good for Asos on the eve of its latest results release. The online fashion retailer announced that it expects full-year profit before tax to be at the top end of market expectations, despite the extra costs brought by the pandemic.

Clothes retail took quite a hit as the lockdowns kicked in, and even by May sales were reportedly down almost half. While sales dropped across the sector, the percentage of retail sales that took place online saw an uptick, growing to a high of 32.8% in May. That figure had dropped slightly to 26.6% by August, but was still significantly higher than the 19% reported 12 months ago. As an online-only retailer, Asos has been sheltered from the damage caused by store closures and a drop in footfall, benefiting from the increase in online shopping and necessity of home deliveries as customers found themselves locked down at home.

The Asos share price was given another boost in August when the company announced that its full-year profit will be significantly ahead of market expectations. For most firms, strong sales performance was counteracted by the unexpected jump in expenses thanks to Covid-19, making it all the more impressive that Asos revealed a bullish forecast.

The group saw a strong recovery in the EU on the back of its economies being reopened. In the four-month period until the end of June, sales jumped by 10% to £1.014bn, but the company is still cautious about its outlook in the medium term.

A big year for ASOS

After a difficult 2019, the latest results are expected to hold some much-needed good news for Asos. Last year’s operational expansion into Europe and the US had its teething difficulties, resulting in a 68% drop in profit, from £102m to £33.1m, this time last year.

The Asos share price has risen sharply in the last six months, and the fashion retailer will hope that the bullish trend continues as the new results are revealed.

Asos released its full-year results on Wednesday at 7am. Find out what happened to the Asos share price in our results analysis.