Asos upgrades sales and profit outlook as returns drop

British online fashion retailer Asos forecast full-year sales and profit significantly ahead of market expectations, saying it was benefiting from stronger than anticipated underlying demand and fewer products being returned by shoppers.

Shares in Asos surged 8.5 percent on Wednesday morning UK time, extending gains this year to 36 percent after it said revenue growth for its 2019-20 year was now expected to be between 17 and 19 percent.

It forecast pretax profit in the region of $170-$196 million, up from $43.2 million in 2018-19.

Several British clothing retailers, including Next and Superdry , have recently reported better-than-expected trading as Britain emerged from coronavirus lockdown.

Asos, whose fast fashion is popular with shoppers in their twenties, said it had expected to see return levels normalize once lockdown measures eased and customers were able to ship returns and felt more comfortable doing so.

However, it said returns were not increasing at the rate it had anticipated due to strong demand during the lockdown for activewear and a shift to more deliberate

It said this reflected robust demand for “lockdown” categories, such as activewear, and a prolonged shift in customer behavior towards more intentional purchasing across all ranges.

German online fashion retailer Zalando said on Tuesday it had also benefitted from a decline in returns, though it assumes the fall will be temporary

“Looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favorable shopping behavior will persist,” Asos said.

Last month Asos said it would repay the money it claimed under Britain’s scheme to furlough workers during the crisis.