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Summary
- ASOS PLC reported sales of £3,263.5 million for FY20. The sales increased by 19% year on year.
- The performance was supported by improved demand for online shopping during the lockdown.
- French Connection Group reported revenue of £23.9 million, which was down by 53.1% year on year for the six months ended 31 July 2020.
- The sales were impacted by the closedown of stores and weaker consumer demand.
Asos PLC (LON:ASC) and French Connection Group PLC (LON:FCCN) are two consumer discretionary stocks. Shares of ASC were down by around 7.54%, whereas shares of FCCN were up by nearly 9.01% from their last closing price (as on 14 October 2020, before the market close at 9:00 AM GMT+1).
Will ASOS PLC be able to carry on the growth momentum in FY21?
Asos PLC is a UK based online retailer of clothes, footwear and other accessories. The Company had 13 ASOS brands, and it has partnered with around 850 brands that are sold through its website. It has more than 85,000 products listed on its platform. The Company caters in over 200 markets in ten languages through its website and mobile applications.
FY2020 results as reported on 14 October 2020
(Source: Company website)
In FY20, ASOS sales stood at £3,263.5 million, which increased by 19% year on year from £2,733.5 million a year ago. The retail sales in the UK contributed £3,171.0 million in FY20 that was better than £2,657.7 million of sales reported last year. International retail sales added £1,175.9 million during the reported period. The gross profit increased by 16% year on year to £1,547.4 million in FY20. The profit before tax jumped by almost 329% year on year to £142.1 million in FY20. The diluted earnings per share were 125.6 pence. As on 31 August 2020, ASOS had net cash of £407.5 million.
Regional and Operational performance
(Source: Company website)
The UK reported sales of £1,214.1 million in FY20, which improved from £1,029.8 million a year ago. The EU sales were £1,030.2 million, whereas the US and Rest of the World sales were £415.3 million and £603.9 million, respectively. ASOS had 23.4 million active customers in FY20 that were up by 15% year on year from 20.3 million. The average basket size, including VAT, was £71.92 in FY20, which increased by 1% year on year from £71.29. The average units per basket were 3.18, with an average selling price per unit of £22.63. In FY20, total orders stood at 80.2 million. The total visits on the ASOS websites were 2,691, which increased by 19% from 2,266.5 million a year ago. Out of the entire website visits, 85.5% of visits were through mobile phones.
Priorities of ASOS PLC
(Source: Company website)
Share Price Performance Analysis
1-Year Chart as on October-14-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
ASOS PLC's shares were trading at GBX 4,972.70 and were down by close to 7.54% against the previous closing price (as on 14 October 2020, before the market close at 9:00 AM GMT+1). ASC's 52-week High and Low were GBX 5,548.00 and GBX 975.20, respectively. ASOS had a market capitalization of around £5.37 billion.
Business Outlook
The Company targets to increase market share through ASOS brands and ASOS platforms. It is cautious of consumer demand as the ongoing pandemic has disrupted the financial stability of people. ASOS mainly targets the 20-something customers for sale through its platform, and any impact on their disposable income could affect the sales. The Company highlighted that it would continue to grow profit, and it would be cash generative. It is also mindful of the consequence the Brexit can have on the business, although it is well prepared for it.
French Connection Group PLC: How are the new lockdown measures going to pan out on the retail store business?
French Connection Group PLC is a UK based design brand that is engaged in the retail and wholesale of clothing. The Company has 234 self-operated and franchised stores, and it had an average retail space of 124,300 sq feet.
H1 FY21 results (ended 31 July 2020) as reported on 13 October 2020
(Source: Company website)
In H1 FY21, French Connection reported revenue of £23.9 million, which declined by 53.1% year on year from £51.0 million a year ago. The sales were impacted as the stores were closed from 23 March 2020 to 15 June 2020, and post reopening the sales remained subdued. The underlying loss widened to £12.2 million in H1 FY21 from £3.1 million a year ago. The loss widened due to the lower revenue and one-time stock provision related to higher residual inventory that was around £3.1 million.
In H1 FY21, the Retail revenue stood at £10.1 million, which declined by 57.6% year on year from £23.8 million a year ago. Total Wholesale revenue was £13.8 million in H1 FY21 that was down by 49.3% year on year from £27.2 million in H1 FY20. The e-commerce sales increased by 8.1% year on year in H1 FY21 that was driven by improved demand for casual clothing and homeware.
Following the impact of covid-19, the Company closed nine stores during H1 FY21. It had an active discussion with the suppliers and landlords to preserve cash and mitigate other discretionary costs. French Connection has secured a 24 months working capital facility that it thinks would be sufficient to run over the next two years. As on 31 July 2020, French Connection had cash of £5.2 million.
Underlying operating profit/ (loss)
Share Price Performance Analysis
1-Year Chart as on October-14-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
French Connection Group PLC's shares were trading at GBX 7.50 and were up by close to 9.01% against the previous closing price (as on 14 October 2020, before the market close at 9:00 AM GMT+1). FCCN's 52-week High and Low were GBX 39.50 and GBX 3.00, respectively. French Connection Group had a market capitalization of around £6.64 million.
Business Outlook
During the first six months of FY21, the sales were severely impacted by the pandemic. Post store reopening there was a slight uptick in demand; however, that has again started subsiding following the new lockdown measures imposed recently. The Wholesale business in the UK has been performing well with more demand for casual products and increasing interest for the winter collection, but the order in the US remains bleak. It also expects the online business to be resilient as the winter collection has received a good reaction. The Company highlighted that outlook would continue to be uncertain over the next few years, and in the meantime, it would focus on cost-cutting measures.
