International sales rose 54 per cent at ASOS in the half year to 28th February, and now account for 62 per cent of the online fashion retailer’s total sales.
The company has been expanding its logistics operations on the continent and in the first week of March 2017, it transitioned over 2m units of stock from the existing Eurohub 1 facility just outside of Berlin to the new purpose designed and built fulfilment centre, known as Eurohub 2.
“The phase 1 build of Eurohub 2 is now operational and one off transition costs will be included within operating costs in the second half of the year. To date these are running in line with plan. The warehouse has more than doubled our stockholding capacity in Continental Europe and almost quadrupled throughput capacity, as well as providing greater capability and opportunity to improve the customer proposition further.
“Over the next three months, operations will continue to ramp up in Eurohub 2 with the receipt of stock and shipping of orders, which will reduce the need to transfer stock between warehouses and ultimately prepare us for the first phase of Global Fulfilment. This programme will enable us to fulfil 100 per cent of orders to Germany, France, Spain and Italy from Eurohub 2 compared to the previous c.50 per cent fulfilment levels from Eurohub 1.
“In parallel to Phase 1 continuing to ramp up, a ground breaking ceremony launched Phase 2 last month. Once completed, this will double the square footage of the fulfilment centre in preparation for automation in FY 2018.”
In the US, ASOS is fulfilling about a quarter of its orders from its UK operation with the remainder being despatched from the UK.
“We have recently undertaken an extensive network modelling exercise, based on total landed cost (supply) and optimised customer service goals (demand/service offer), to identify the optimal location for our US fulfilment centre. We expect to have decided on that location very shortly and for a site to be quickly identified thereafter.”
In the UK, ASOS increased sales by 18 per cent to £340.8m. During the first half a second despatch sorter was added in Barnsley. The new inbound conveyors also allowed for additional intake and throughput capability.
It is continuing to invest in the Barnsley site, with a fifth packing module currently being installed and due to be operational by the end of the financial year in readiness for the peak trading period.
Work continues on expanding Barnsley in the second half of this year, enhancing the current facilities for the people who work there as well as providing additional office space.
ASOS has also completed the development of fulfilment software changes and the technology needed to open the new EuroHub 2 fulfilment centre. “The new fulfilment software is a major change and will allow us to control which country sites have access to which stock pools as well as improve our delivery proposition for each of these countries over the course of this financial year.”
Group distribution costs increased by 70bps to 15.4 per cent of sales driven by increased international order mix, expansion of faster delivery propositions and free returns options compared to last half year, as well as moving standard deliveries from untracked to tracked services in many territories.
Warehousing costs increased by 20bps to 8.2 per cent of sales due to an increased Eurohub 1 fulfilment mix, “which is currently a less efficient manual operation, offset in part by productivity improvements at Barnsley driven by continued investment in automation technology”.
Retail gross margin was down 40bps at 47 per cent, but pre-tax profit rose 14 per cent to £27.3m.
Chief executive Nick Beighton said: “These are a strong set of results, showing great progress across the business. International growth of 54 per cent has been excellent and with the Rest of the World segment a stand out performer.
“Customer acquisition, up 29 per cent, takes our active customers to over 14m. We passed the 5m active customer mark in the UK, where we have shown solid sales growth of 18 per cent in a more promotional market. We’ve accelerated our significant infrastructure and technology projects which remain on track, and Eurohub 2 went live in March.
“Given the current momentum we are seeing, ASOS is making good progress towards its ultimate goal of becoming the world’s no. 1 destination for fashion-loving 20-somethings.”