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Author: Alan LittleDate: 2021-11-11

ASOS (ASC) +3% on plans for £7bn in annual revenue by 2025

Popular online fashion retailer ASOS (ASC) made notable gains in London in midweek after it set ambitious targets for profit margins and revenue.

Online fashion retailer ASOS (ASC) closed 3% higher on Wednesday after it revealed plans to double its profit margin and deliver annual revenues of £7bn by the middle of the decade.

Investors had feared that the pandemic boom that ASOS enjoyed was subsiding after the company issued a profit warning last month, but it was much more upbeat at its Capital Markets Day in midweek.

ASOS said that it is now targeting 15% to 20% annual growth in sales, a figure that it hopes to achieve by bringing in £1bn more from recently acquired brands, including Topshop and Topman, and expanding further into markets in Europe and the US.

The London-based retailer also believes that increased cost and scale efficiencies will enable it to grow its profit margin from 4% to “at least” 8% over the next three or four years.

The firm’s chief operating officer Mat Dunn said that leveraging its “strong, scalable global platform” will enable it to meet its ambitious targets in the long term.

Responding to the news, Hargreaves Lansdown analyst Laura Hoy believes that the company’s partner fulfilment segment will be central to any potential success.

Currently, it only accounts for a small portion of revenue, though there are plans to increase this significantly in the future.

Hoy noted: “Growth in this higher-margin part of the business is essential if the group’s to meet its goal for operating margins of at least 8 per cent in the longer term.”

ASOS said that it can count on a burgeoning target audience of fashion-conscious young people who will make up a total addressable market of £430bn by the end of the decade.

ASOS shares made gains in London on Wednesday, rising 3% to 2,654p.

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