On the surface, the formula is simple: ramp up investments, target local areas, set up distribution models with new technology and understand customer preferences with the next generation in mind.
“The opportunity ahead of us in global online twentysomething fashion is huge, and that’s why we’ve continued to invest at our current levels to capture that opportunity,” Nicholas Beighton, chief executive officer said during Wednesday’s conference call to discuss earnings.
“Asos tech has smashed it again this year, driving change in innovation at an increasing speed,” he said. “We released 2,900 customer-enhancing tech releases during the year, up from 500 two years ago. That’s a sixfold increase.”
Earlier Wednesday, Asos released better-than-expected earnings for the period ending Aug. 31 with retail sales up 26 percent. The stock surged nearly 17 percent after the market opened in New York and Wells Fargo rated the stock a “top pick.”
A welcome development for the retail sector that has had weaker-than-expected sales and profit warnings, dragging down the entire sector the first week of October.
The groundwork for the expansion has been in place for some time. The company invested 242 million pounds last year on capex projects and plans to spend around 250 million more this year with new retail systems, renovations to the London office and the new U.S.-based distribution center, a bid to gain Stateside consumers.
“I have actually visited the warehouse in Atlanta,” Beighton said of the facility that has a 10-million unit capacity and offers two-day and next-day services in the United States.
Asos, which stands for “As Seen On Screen,” also automated its European distribution center in Germany and added local management in Asia and Australia.
While some investors have been skeptical about a British fast-fashion brand’s ability to tap into the U.S. market, John Stevenson, a retail analyst at Peel Hunt, said it’s all about knowing the local market.
“You have to have an understanding of what it’s like on the ground, what people are buying,” Stevenson said. That includes things like what holidays are in each country, when the sales are and incorporating local payment methods into operations, he said.
“They’re not going to start marketing with subpar delivery service or until they’ve got the product perfect,” Stevenson said. “Everything has to be right. They’re doing that across all areas. Now they can start marketing harder in all markets, but the U.S. in particular.”
In addition, Stevenson said Asos has the best retail customer experience in all of England, which means people are more likely to stay on the platform and more likely to spend money.
The retailer recently rolled out Collusion, a collection that emphasizes inclusivity — from plus-size to tall to petite to gender-neutral.
“It’s a collection designed for our Gen Z customer,” Beighton said.
During the conference call, he said the collection was the number-four brand in sales in the first week.
“So what does this mean for us?” Beighton said. “Well, it gives us huge confidence in our future. We’re positioned in the right growth channel and we’re investing for the future with this large addressable market — as our prize.”