Asos boosts investments as sales soar 27%

Dive Brief:

British fast-fashion player Asos said Wednesday that sales rose 27%, reaching £1.13 billion (roughly $1.6 billion at current exchange rates) over the last six month period.
For the first time, visits to the digital native brand's site surpassed 1 billion. Engagement also increased, with active customers up 17%, average basket value up 2% and order frequency up 8%. Customers placed 29.9 million orders, up 28% from the year-ago period, the company said.
To fuel growth, the company is planning to increase capital spending over the next two years to between £230 million to £250 million ($327 million to $355 million), up £30 million from a previous range. As a result, shares fell 12%, the most since the Brexit vote in June 2016, Bloomberg reports.

Dive Insight:

As Asos celebrates a new milestone — hitting 1 billion in site visits — CEO Nick Beighton said the company needs to focus on investments to keep the momentum going.

"Alongside our investment in our people and our technology, we are accelerating investment in our distribution and logistics, laying the foundation for £4 billion of net sales, a further step in building ASOS into the world's number one destination for fashion loving 20-somethings," he said in a statement Wednesday.

Investors may like that long-term number, but in the meantime they're not impressed. Revenue growth missed estimates for the first time in over 18 months, according to a note from Andrea Ferraz, head of EMEA Internet Equity Research at Morgan Stanley, cited by Bloomberg.

And yet, customers remain infatuated with the brand. In January, WSN analysts called Asos "a real retailer to watch" because of its investments in product innovation, churn and supply chain. As a result, it's been beating rivals on average amount spent — 27% higher than its three biggest U.K. competitors: Boohoo, Missguided and PrettyLittle Thing.

Asos also recently took body positivity up a notch by not only offering inclusive sizes but also displaying apparel on various body types. It's a lovely message to telegraph to shoppers in stores or online, but the tactic could also help boost online-only Asos by helping shoppers see what clothes might look like on them.

Many apparel shoppers in particular stick to shopping brick and mortar because of the ability to assess fit and walk out the door with their purchase. Asos has met the latter challenge with initiatives like its Try Before You Buy program and Asos Instant same-day delivery, which launched in October.

"E-commerce is retail's new battleground and Asos its current leader — a position that we predict is unlikely to change anytime soon, despite younger upstarts such as boohoo.com and Missguided coming to the forefront," WGSN said in January.