Asos has confirmed it plans to repay the Government the money it saved by furloughing around 1,000 staff via the Job Retention Scheme as the pandemic hit.
In a trading update, Asos said: ‘As a result of our expectation that we will deliver a better than initially anticipated full-year performance, we are repaying the support we received from the UK Government furlough scheme.’
Asos told This is Money the cost of the repayment looked set to come in at just under £2million for April.
Joining the likes of Primark and John Lewis, Asos also said that it would not be taking advantage of Chancellor Rishi Sunak’s £1,000 per employee bonus scheme for bringing back staff from furlough.
Asos has confirmed it plans to repay the Government the money it saved by furloughing its staff via the Job Retention Scheme
Asos’ fast fashion rival Boohoo is embroiled in a scandal regarding allegations over working conditions at supplier factories in Leicester.
Asos reportedly dropped a slew of suppliers after unearthing health, safety and human rights threats.
According to the Telegraph, a leaked 2018 report stated that Asos inspectors had found a series of breaches at around a quarter of its suppliers, include some sites in the UK. The Telegraph added that since then, Asos has ditched several factories.
One supplier in the UK it reportedly ditched was based in Leicester, the city which has been at the centre of allegations involving Boohoo, the the Telegraph said.
A spokesperson for Asos told This is Money: ‘At the heart of our industry-leading ethical trade policy is a commitment to rigorously and regularly audit our supply chain to ensure workers’ rights are protected and respected.
‘We work hard to uncover risks, often with the support of local NGO partners and unions on the ground, and if issues are identified we work closely with our suppliers to remediate them, ensuring that improvements are made quickly and effectively, which are then monitored through follow-up audits.’
The impact of the allegations surrounding Boohoo has been dramatic, with its share price tumbling.
Some of Boohoo’s investors, including Aberdeen Standard Investment, have already started offloading their stakes in the fast fashion group. Aberdeen Standard Investments said Boohoo’s response to the allegations had been ‘inadequate in scope, timeliness and gravity.’
Big-name brands in retail, including Amazon, Asos and Next have temporarily pulled Boohoo products from their online shops as a result of the allegations.
Asos’ rival Boohoo is embroiled in a scandal regarding allegations over working conditions at supplier factories
Boohoo launched an urgent investigation into its supply chain earlier this month, saying conditions at the warehouse in question in Leicester were ‘totally unacceptable and fall woefully short of any standards acceptable in any workplace.’
A review will also be carried out by Alison Levitt QC, which will be accompanied by a £10million investment in ‘eradicating malpractice’ across Boohoo’s supply chain, the company said.
Meanwhile Asos also revealed its sales rose 10 per cent to over £1billion in the four months to the end of June, after suffering a near 25 per cent fall in sales once lockdown kicked in.
‘Lockdown’ fashion helped drive Asos’ sales up, with casual clothes, exercise gear and face masks all proving popular with shoppers, while occasion-wear and dresses fell out of favour.
Asos said: ‘This shift in product demand was reflected in a reduction in average selling price, which was 9% lower in the period and flowed through to average basket value.
‘The categories that outperformed also attract an overall lower gross margin.’
Asos said it expects sales of clothes like dresses for weddings to remain limited ‘until a more normal pattern of social events resumes’, adding that a second wave of the virus remained a possibility.
The company said it also remained ‘cautious’ about consumer demand, noting that the economic and financial hit for its core customer base in their 20s looks set to hit later this year.
Looking ahead to the next key fashion season this autumn, Asos said stock availability from some of its ‘brand partners’ could also remain a challenge amid the global pandemic.
During lockdown, Asos cut the number of promotions available to shoppers via its online shop and reduced its spending on marketing.
Nick Beighton, chief executive at Asos, said: ‘This has been a tough time for all businesses, but we have remained focused on doing the right thing for our people and our customers and making sure that we emerge from the current crisis as a stronger and better organisation.’
He added: ‘Our performance in P3 shows that we are delivering against this aim despite the tough economic and social backdrop.
‘We have learnt a lot and adapted quickly, and ASOS finishes the period with improved underlying profitability.
‘While we remain cautious about the consumer impact of Covid-19 looking forward, we are on track to deliver strong year-on-year profit growth and to return to positive free cash flow for the full-year.’
Asos said it had over 235million visits to its online shop in June, with around 23million active customer, 7million of which are located in the UK.
Back in 2014, a fire at one the company’s warehouses in Barnsley caught fire, prompting Asos to close its website for orders for nearly three days.
The company now sells around 85,000 products on its website, sourced from 850 global and local third-party brands, and has a number of own-brand labels. The vast majority of the company’s suppliers are based outside of the UK.
Asos said it remained ‘cautious’ regarding its outlook for the near future, but expects its full-year profit to come in at the upper end of market predictions.
Russ Mould, investment director at AJ Bell, said: ‘The fashion retailer had already been through the wars before the pandemic thanks to warehouse problems. Coronavirus struck just as ASOS was getting back on its feet, meaning the company had to be very careful not to derail its recovery efforts.
‘Online retailers have enjoyed a surge in demand during lockdown as people stuck at home find solace in having deliveries to their homes to cheer them up.
Some of Boohoo’s investors, including Aberdeen Standard Investment, have already started offloading their stakes in the fast fashion group
‘While Asos had a clear advantage over high street retailers, a reduction in marketing activity meant sales growth in some of its regions wasn’t at the levels one might expect from the business.’
He added: ‘It looks like Asos will have to wait a bit longer for a return of its normal sales mix. Even though more people are now returning to work and shops and leisure attractions are reopening, it seems there is still subdued demand for a big night out or going abroad on holiday. As such, Asos is still without a major sales catalyst for a key part of its product range.’
Shares in AIM-listed Asos have fared well today and are currently up over 5 per cent or 188.45p to 3,561.45p. A year ago, the share price stood at around the 2,737p mark.
In respect of Asos’ share price performance, analysts at Liberum said: ‘We remain sellers due to concerns of heightened promotions as we head into Q4, and considering the strength of the shares the past few months, we see this reversing somewhat.’
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