ASOS reveals plans to DOUBLE profit margins

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ASOS shares rise as struggling online fashion retailer reveals intention to DOUBLE profit margins

  • Online fashion retailer expects EBIT profit margin of at least 8% in the long run
  • Its actions struggled amid profit warnings and shocking CEO resignation










ASOS shares rose nearly 4% today after the online fashion retailer revealed plans to double long-term profit margins.

The company told investors in a presentation on the capital markets day that it expects a profit margin of “at least” 8% over the long term – double its current medium-term target of 4% – thanks to to increased costs and economies of scale as it expands.

ASOS said achieving this goal would involve adding more than £ 1 billion in revenue from its own brands, expanding its business in the UK and doubling the size of its presence in the US and in the EU.

ASOS intends to double the size of its presence in the US and EU

Over the next three to four years, ASOS has reiterated its goal of £ 7 billion in revenue.

ASOS shareholders have been going through a rough patch lately, with the shocking resignation of CEO Nick Beighton and the company issuing a profit warning causing stock prices to drop sharply in October.

Originally called “As Seen On Screen” to sell copies of clothes worn by stars on TV and in movies, was founded 21 years ago, but struggles to grow into adulthood.

It has benefited from the shift to internet shopping during the closings, but its shares have lost more than half of their value in the past 12 months.

In its market update on Wednesday, the group, which remains without a CEO, highlighted the improved technology and logistics platform as laying the “foundations to support long-term global growth.”

He also noted the recent acquisition of the Topshop brands as “an important global customer acquisition tool”.

ASOS’s target market of ‘fashion-conscious consumers 20 and over worldwide’ will reflect a total addressable market of £ 430 billion worldwide by 2030, according to the group.

COO and CFO Mat Dunn said, “ASOS clearly aims to meet the needs of our consumers, and we have created a winning offering underpinned by our best-in-class customer experience.

“Our plan will ensure that we fully leverage our strong and scalable global platform to achieve our ambitions. “

ASOS shares rose 3.5% to 2,665p by 11:30 GMT, bringing losses to 44.5% year-to-date.

Hargreaves Lansdown equity analyst Laura Hoy said ASOS’s focus on “increasing partner satisfaction … holds the key to long-term success.”

She added: “Growth in this higher-margin part of the business is essential if the group is to meet its operating margin target of at least 8% over the longer term.

“Currently, the segment is only a small fraction of total revenue, but ASOS plans to increase that number to around a quarter.”

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