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Asos Profits Up While Gross Margin Suffers

Propelled by the weak pound, Asos profits got a big boost from a large uptick in exports.

The fast fashion etailer reported that profits were up 14 percent to 27.3 million pounds ($34 million) in the first half, ended February 28th, 2017.

“As a net exporter, sterling weakness has created a foreign exchange tailwind for the business which has enabled investment above previously planned levels into both price and proposition,” Asos said in its financial report.

As a result, the company posted a 38 percent sales increase to 889.2 million pounds. The UK increased by 18 percent while the rest of the world was up 54 percent. The U.S. reached 124.3 million pounds from 76.8 million pounds during to the same period the year prior.

Retail gross margin was down 40 basis points to 47 percent as a result to price cuts.

The company said the weak pound could increase sourcing costs through the second half, according to Bloomberg. Shares fell by 7.4 percent on the news.

Asos continues to be a draw for its core 20-something fans. The retailer has acquired 29 percent more active customers. The UK represents 5 million while the U.S. accounts for 2 million of the 14.1 million total. Total orders shipped were up 33 percent to 23.3 million pounds compared to the previous year.

Asos adjusted its full-year guidance. It now expects a 30 percent to 35 percent increase in retail sales, up from the previously predicted 25 percent to 30 percent.

Forty percent of the store’s assortment is Asos brands while 60 percent is from outside labels. An ASOS activewear line is among the new collections to be added. The company meets its demanding consumers’ need for newness with thousands of new styles added each week.