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Investment hurts profits at Asos

Article By: ,  Financial Analyst
April 2, 2014 10:45 AM

The share price of online fashion retailer Asos is up this morning (April 2nd), after the company revealed its latest financial results.

It was announced by the firm that its profit before tax was recorded at £20.1 million, which is a significant drop from the 2013 data of £25.7 million.

However, Asos insisted that it has had a strong trading performance in the last few months and the company noted the drop in its profits was as a result of investment in the business.

In a statement, chief executive officer Nick Robertson stated that he is pleased to report a "strong" trading performance for the six weeks to the end of February.

He pointed out that the data released by the firm shows retail sales are up by £120 million to £472.3 million, while there was a large expansion of retail gross margin and growth of 36 per cent in the company's active customer base to 8.2 million

Mr Robertson said: "Customer engagement remains high with growth in visits, conversion and average basket value. We are now investing in the capacity to support a truly global business with sales of £2.5 billion as the next staging post on our journey."

Investment

The Asos chief executive also noted an investment in logistics, its IT platform and its overall customer offering has affected the profits recorded by the company in recent months.

He said: "This increased pace of investment has reduced our profitability in the period, but will deliver significantly increased capacity as well as efficiencies in the longer term. Asos is not and has never been about the short-term; the scale of the global opportunity remains as exciting as ever and we are investing for the many opportunities ahead."

Investors responded strongly to the comments made by the Asos chief executive, with stocks in the firm up by two per cent in the early stages of trading this morning on the London Stock Exchange. However, by 08:23 BST, these gains had been pared back to 0.5 per cent.

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