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Whilst necessity may be the mother of invention, As Seen on Screen (ASOS) has proven that inspiration is the mother of innovation.
The share price of ASOS (LSE:ASC) rose 91.00 pence (3.69%) in trading today on the news of an outstanding 1st quarter. Good financial reports from retailers are hard to come by these days as consumers hang on to their cash a bit more tightly than in the past.
Selling clothing at retail is about as exciting as watching grass grow. Hardly an idea upon which to build a new company. But Nick Robertson and Quentin Griffith imagined an exciting, new approach to the market: target the younger adults who are still starry-eyed and sell the fashions worn by on-screen celebrities. Suddenly a whole new niche was created. Of course, the best tool for widespread success today is not built of brick and mortar, but in hiring technical gurus to build a cyberstore in cooperation with the marketing team.
ASOS share price has effectively doubled over the past 12 months from 1240.00 at 12 December 2011 to 2554.00 at 12:50 pm today after having peaked at 2608.00 in early morning trading. On this date three years ago the stock was trading at 467.80. That tells a story. ASOS’ market cap has now exceeded the £2,100 million mark.
The first quarter results featured a 30% increase increase in both total retail sales and total revenue. Total sales were £165,795 million, up from £127,120 million year-on-year. Total revenue jumped from £130,692 million to £169,431 million. ASOS realized significant sales gains in every market sector with a 15% gain in the EU, a 24% gain in the UK, a 57% gain in the US, and a 42% gain in the rest of the world.
The company announced that retail gross margins had fallen by 100 bps, but, in perspective, that number is a fallback from a 440 bps increase during the same period last year.
ASOS ships to over 160 different countries, attracting 23 million potential customers per month. The company has 10.1 million registered users, up from 7.1 million year-on-year, and 5.4 million active customers (purchased within the last 12 months), up from 4.0 million last year.
ASOS’s success story is similar to that of Chris Haney and Scott Abbott from Toronto, who had the inspiration to create a new game because the were missing pieces of their Scrabble game. They came up with Trivial Pursuit. In one sense, I enjoy seeing the dreams of inspired people enjoying their dreams become reality. From yet a different perspective, it is saddening to see ventures of this kind skyrocket, only to peak and fall out of public favour as copycat competitors jump into the fray or as the jaded public looks for something even newer.
Let’s hope that ASOS’ innovation does not become a short-lived fad, and that inspiration will continue to be the genetic code for continued success.
