ECOMMERCE

British online fashion giant doubling down on the U.S.

BY Marianne Wilson

As if American apparel retailers didn't have enough homegrown competition, ASOS, the largest online fashion retailer in the U.K., is making a major push into the American market.

The company has signed an agreement to establish its second North American fulfilment center, in Union City, Georgia, outside of Atlanta. The center, which has an initial investment of $40 million, will be able to handle 10 million items, with the opportunity to expand further. Construction is expected to begin shortly, with operations starting in fall 2018.

"This agreement is a major step forward for ASOS in the US and demonstrates the opportunity we believe lies ahead in this key market," said Nick Beighton, CEO, ASOS. "Our US business delivered 39% constant currency growth in the first six months of the current financial year. Our U.S. fulfilment centre will enable us to significantly develop our proposition for our 20-something US customers supporting our continued growth and future ambitions."

Founded in 2000, ASOS (which stands for "As Seen on Screen") targets young millennial men and women with affordable fast-fashion items and accessories. It features 85,000 different products (including 4,000 new styles every week) to 12.4 million active customers. About 40% of the mix comes from its own brand, and another 20% from exclusive items created for it by other brands. The rest is made up of items from both well-known labels and smaller ones.

According to Business Insider, U.S. sales make up 12% of ASOS's total sales globally, and are growing twice as fast as U.K. sales. The retailer is looking to capitalize on that growth with its new distribution center.

"This fulfilment centre will significantly enhance ASOS' US customer proposition providing more cost effective, faster and more flexible delivery options," the company stated.

The company currently has a market cap of about five billion British pounds, or around $6.5 billion. Sales totaled about $1.8 billion in 2016. With eight local language websites, ASOS sells to customers in the U.S., U.K., Australia, France, Germany, Spain, Italy and Russia.

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FINANCE

CVS Health tops Q2 forecasts

BY Marianne Wilson

The nation's second largest drugstore chain by store count posted a higher-than-expected quarterly profit amid stronger demand for its pharmacy benefits management business.

CVS’ net income rose 18.8% to $1.1 billion in the second quarter, ended June 30. Net revenues rose 4.5% to $45.7 billion, with a 9.5% increase in revenue in it pharmacy services segment, which includes its pharmacy benefits manager (PBM) business and specialty pharmacy services.

Net revenues in the company’s retail/LTC segment fell 2.2% to $19.6 billion, amid softer traffic, increased generic dispensing and reimbursement pressure. Same-store sales fell 2.6%.

“The second quarter results we posted today keep us nicely on pace to achieve our full-year targets," said CVS Health president and CEO Larry Merlo said. "Operating profit in the retail/LTC segment was in line with expectations while operating profit in the pharmacy services segment exceeded expectations. While we are pleased to report results consistent with our expectations, we won’t be satisfied until the total enterprise returns to healthy levels of earnings growth.”

Pharmacy same-store sales dropped 2.8% in the quarter, with same-store prescription volumes remaining flat on a 30-day equivalent basis. Front-end same-store sales dropped 2.1%, impacted by softer customer traffics and the company’s efforts to rationalize promotional strategies.

Håkon Helgesen, analyst at GlobalData Retail, commented that the retail side of the CVS operation is a “neglected part” of the company's business and, as a result, performs well under its potential.

"The blunt truth is that, outside of health care needs, many consumers see CVS as a place to buy essentials when nowhere else is convenient," Helgesen said. "Others buy a few products when they come to pick up prescriptions. Relatively few retail shoppers see CVS as a destination in its own right, even for categories like beauty. Given the scale of CVS, which puts its stores in easy reach of most Americans, this is a massive lost opportunity."

During the second quarter, CVS opened 27 new retail stores, relocated 10 stores and closed three. During 2017, the company said it still plans to close roughly 70 retail stores. In the first half of the year, it has closed 63 stores and taken a charge of $205 million.

The company said Tuesday it now expects adjusted earnings of $5.83 to $5.93 per share in 2017, as it raised the lower end of its previous forecast from $5.77 per share.

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ECOMMERCE

Amazon’s back-to-school sales start strong

BY Deena M. Amato-McCoy

Based on the momentum of early back-to-school shoppers, Amazon is on pace to hit a record 80% sales growth for the season.

The online giant's school supplies sales have grown by 35% year-over-year in the first two weeks of the back-to-school shopping season, according to One Click Retail. Early back-to-school shopping only accounted for 9% of sales in 2016.

Last year, Amazon’s back-to-school sales hit a record 20% growth over the entire season. This year, the online giant has a total growth potential of over 80% for back-to-school 2017.

According to One Click Retail’s “Office Product” report, Amazon's sales of office products grew by 25% to reach over $2 billion in 2016, while remaining brick and mortar U.S. sales grew by only 1%. Accounting for more than 20% of total U.S. sales of office products, Amazon's double-digit growth continues into back-to-school 2017.

Sales of laptops and accessories have already earned more than $25 million. Tablet sales have nearly doubled (98% growth) and youth apparel is up by 61% over the same two weeks in 2016. Laptop accessories are up by 45%; laptops by 8% and calculators by 6%.

The online giant’s apparel sales also grew by 25% in 2016 to a value of $3.4 billion. Shoes grew more rapidly, with growth of 35% — bringing the company’s shoe sales to $1.6 billion for 2016, according to reports from One Click Retail.

Both the apparel and shoes product groups see a predictable annual shift in shopping habits during back-to-school, with parents turning to Amazon to purchase shoes and clothing for their school-aged children.

"While this early indication doesn't necessarily predict the more sales-heavy remainder of 'Back-to-School' season, it does show early velocity,” said Spencer Millerberg, One Click Retail CEO. “It paints a picture that more parents are multi-tasking on Amazon during 'back-to-school night' for those supplies vs. stopping by the store on the way home."

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