ASOS in pledge to keep a hold on price rises

ONLINE fashion retailer ASOS has no plans to follow its rivals and introduce sharp price increases next year despite rocketing cotton costs.

The company, which targets internet-savvy 18 to 34-year-old women looking to emulate the designer looks of celebrities such as Kate Moss, Sienna Miller and Alexa Chung but at a fraction of the price, has promised not to raise the price of its own-brand products.

ASOS chief executive Nick Robertson said this is because the group is growing so fast that suppliers are keen to secure the improved order levels it can offer.

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"Because we're going back to our suppliers and increasing our orders by 50 per cent, we can negotiate hard on that basis," he said.

Last week Next, the UK's second biggest fashion retailer after Marks & Spencer, said shoppers face near double-digit price rises for clothes next year due to the soaring price of cotton.

ASOS, which is to open a 40m state-of-the-art distribution centre in Barnsley next May, announced a 59 per cent rise in first-half profits to 7m in the six months to September 30 and said it is on track to meet market hopes for the full year.

Mr Robertson said that the Barnsley distribution centre is on track and is currently under budget.

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"Barnsley is key to the success of our international expansion and I am pleased to report that this project is on schedule for commissioning in Spring 2011," he said.

He added that the warehouse, which will help to quadruple the size of the business over the next five years, will have an initial sales capacity of 600m. Fully fitted, it will give the group capacity for over 1bn of sales.

Mr Robertson estimated that up to 1,000 jobs will be created following the opening of the Barnsley site, which will be one of the three biggest retail warehouses in the UK.

The 530,000 sq ft warehouse, at Park Spring Road, in Barnsley, will be three times bigger than ASOS's warehouse, in Hemel Hempstead, in Hertfordshire, which is to be closed.

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ASOS said it is on track to meet full year pre-tax profit expectations of 28m.

Shares in ASOS have more than doubled over the last six months, fuelled by buoyant trading and speculation the firm could attract a bid from companies as diverse as Danish shareholder Bestseller, US internet giant Amazon and UK retailers Marks & Spencer and Tesco.

But last night the shares closed down two per cent, a fall of 25p to 12.35.

Analyst David Stoddart at Finncap said ASOS has enormous potential, but investment is required to realise that potential.

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"There are clear risks in increasing the scale and complexity of the business at the current rate," he said. "The stratospheric rating reflects only the potential and not the costs and risks. We therefore remain sellers despite a sharp increase in our target price."

Mr Robertson said that best sellers over the six-month period were aviator jackets, capes and party dresses. He was positive about the 2011 outlook despite Government spending cuts and tax rises, pointing to the structural shift of spending from the high street to the internet and ASOS's global potential.

"The UK is only two to three per cent of global internet traffic. So when we look at the size of the prize for ASOS, 97 per cent of my effort is focused outside of the UK," he said.

ASOS launched a website in the United States in September and, since the period end, has launched French and German sites. Analysts expect a Chinese site within six months.

Andrew Wade, analyst at Numis Securities, said ASOS is on the way to becoming a global fashion destination.

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