ASOS share price: 4 things to watch out for in its interim results

ASOS shares fell more than 5% to £31.56 on Thursday after the online fashion retailer said it plans to toughen up its return policy much to the annoyance of its customers.

The news comes just a week away from the company unveiling its interim results, with investors eager to see if the business plans to increase profits and improve sales in the US.

Here are 4 things to look out for ahead of ASOS' interim results on April 10:

Tougher returns policy sends ASOS share price lower

ASOS emailed customers this week to tell them that it is planning to tighten up its returns policy in the hope of clamping down on shoppers who regularly buys clothes at its online store only to send many of them back.

It warned its customers that serial returners could see their accounts deactivated if the company suspects that individuals have worn items and then attempt to return them.

‘We need to make sure our returns remain sustainable for us and for the environment, so if we notice an unusual pattern, we might investigate and take action,’ the company said.

A recent survey by Barclaycard showed that consumers in the UK return around £7 billion worth of purchases each year.

US business slowing down

ASOS’ US business has underperformed with sales slowing down in its first quarter, with retail sales up just 4% to £76.6 million.

‘As our Atlanta warehouse went fully online, demand far exceeded our expectations,’ ASOS CEO Nick Beighton said. ‘Whilst very encouraging for the longer term, this caused a significant short-term despatch back log which we have now cleared.’

‘These delayed shipments will be recognised in P3 and US trading is now regaining momentum. Our ROW segment returned to good growth of 20% after a disappointing Q1,’ he added.

Lacklustre growth in Germany and France

Sales in Europe during the first quarter of the fiscal year increased by 12%, although the company continues to see weaker growth in Germany and France, the retailer’s largest markets.

ASOS pledged to increase investment in price and marketing in both of these markets, with the business eager to show investors that it can deliver stronger growth in the second half of the year and meet its full-year guidance of sales growth of circa 15%.

Strong UK sales growth continues

Offsetting weaker growth in Europe and the US, the UK market saw sales increase by 14% to £244.4 million.

ASOS will need the UK to continue to grow at this pace if it is to calm investors who have grown fearful that the company’s seemingly unrelenting growth is starting to waver.