ASOS Plc (ASC) Earnings Call Transcript & Summary

Hello, and thank you for joining the ASOS analyst and investor call. My name is Robin, and I'll be coordinating the call today. [Operator Instructions] I will now hand you over to your host, Mat Dunn, COO and CFO of ASOS. Thank you.

Thanks, Robin, and good morning, everyone, and welcome to our P1 results call, where I'll be taking you through the results for the 4 months ended the 31st of December 2021. I also have Katy Mecklenburgh, our Interim CFO, with me today. I'll start by taking you through an overview of our performance and some of the nuances of the period before handing over to Katy, who will take you through the financial results in a bit more detail. So turning now to a quick overview of the results. And for clarity, all sales numbers quoted throughout the call are on a constant currency basis, reflecting total sales growth. We've delivered 5% revenue growth in line with our guidance. Given the backdrop over this period, we are pleased with this performance, which reflects the strength of our offer, excellent customer experience and the dedication and hard work of all our ASOS-es. Going into a bit more detail on the backdrop. We faced the expected additional supply chain constraints, particularly over the peak trading period, which weighed on our ability to optimize their stock profile and capture the available demand. Furthermore, towards the latter part of the period, we saw increased uncertainty relating to the Omicron variant. And against this backdrop, we're really pleased with our growth in the U.K. of 13%, driven by strong peak trading and an increased demand for going out wear. This was supported by good customer metrics with continued growth in active customers and increases in frequency visits and orders year-on-year. We're also pleased that the U.S. has grown ahead of the company growth rate. but our performance there was particularly impacted by the supply chain constraints with poor congestion affecting our ability to get stock into our fulfillment center. As a result, we saw lower stock availability in high-demand categories and so we couldn't fully capitalize on the available demand. Similarly, our wholesale sell-through is impacted by these supply chain constraints. And so wholesale revenues contributed at slightly lower levels than Q4 last year. European performance of 2% growth was also impacted by the supply chain constraints and the corresponding impact on stock profile. This was coupled with an increase in restrictions across several key countries, limiting events and going out occasions. We saw strong performance in Germany, driven by increased demand for going out wear there throughout the period with performance accelerating further through November and December, but this is largely offset by weaker trading in France, where we cycled strong comparatives, and we saw customers in particular, return to the high street. Trading in the rest of world remained tough and declined by 15%, reflecting the continued impact of extended delivery propositions as a result of the lack of flights. In terms of customers, we delivered 0.3 million -- an increase of 0.3 million active customers in P1, a result which we're pleased as we cycled a period of exceptional customer acquisition in P1 FY '21. This demonstrates the strength of our core customer base and the stickiness of the customers we added last year. Even more pleasing is that the new Premier subscriptions are up 28.5%, supported by the first Premier Day on the 13th of October. We've made good progress against our recently outlined strategic priorities with a successful Partner Fulfils pilot and the soft launch of the edit ASOS brands in Nordstrom stores and online. And I'll spend some time just updating you on the key callouts here. Starting with TopShop. The TopShop brands continued to perform strongly with growth of nearly 170% year-on-year on the ASOS.com platform and over 200% growth on the year across both wholesale and ASOS.com. The U.K., Germany and the U.S. continue to perform well in excess of these growth rates with the strength of the brand in these markets reinforced. While it's still early on, and this is obviously only a trading update, I want to update you on the progress of our [ ASOS Curve ], physical launch in Nordstrom stores. In November, we successfully debuted our first ASOS drop with Nordstrom. This first drop consisted of both womenswear and menswear [ paces ], and was focused on both casual holiday dressing and iconic party styles with an edit of ASOS Design, ASOS Edition and ASOS Luxe ranges available in 2 physical Nordstrom stores and on Nordstrom.com. This launch was supported by local social and in-store marketing. Initial feedback and sell-through was positive for both online and in-store, with many items selling out in the first 2 weeks online. We'll follow this short update -- we'll follow this initial launch with a full launch in the first half of 2022, and we'll provide a further update on this at our half year results. In terms of our increased channel and broad reach marketing efforts, it's still early days and too soon to update you on our results yet. But we've completed the first set of tests as planned, and we've seen encouraging early results in test geographies. And importantly, we've gained the learning we saw both in terms of landing an effective creative message as well as the right medium mix. We've adjusted our subsequent testing plans based on these learnings, and we'll continue our test to learn approach and update you further as appropriate. We rolled out the pilot of the Partner Fulfils program in P1 in the U.K. in partnership with Adidas and Reebok in early November. It successfully supplemented our existing stock profile by offering additional availability on our existing range where we had stock down. But by the end of December, Partner Fulfils accounted for around 5% of our U.K. sales of Adidas and Reebok. We are particularly pleased with this as these are all entirely incremental sales before we even put any marketing support behind it. Our focus for the remainder of the year is on expanding to add additional products over and above what we currently sell on asos.com as well as rolling out our capability to Europe, and we'll update you with more specifics at our half year results. We also remain focused on efforts to improve the flexibility and speed of our retail model and are accelerating the pace of delivery of our international growth strategy. The next phase of this work will include further alignment of the organization against key priorities, including the establishment of more dedicated teams in support of ASOS and Partner Brands, the further rollout of geographical teams and the establishment of key operating units to drive our face and body and sportswear growth plans. I 'm sure you've also seen this morning that we've announced our intention to apply for admission to trade on the London Stock Exchange rate market. We've demonstrated a strong track record in the first broad shareholder base. However, we feel that now is the appropriate time to apply for admission to the main market in recognition of our progress as a company and to extend the opportunity to [ own ] our shares to a broader group of global institutional shareholders. Separately, we're also delighted to announce the appointment of Patrick Kennedy, Chairman of Bank of Ireland Group plc and former Chief Executive of Paddy Power as Senior Independent Nonexecutive Director and Audit Committee Chair with immediate effect. I'd now like to turn it over to Katy, who will update you on our gross margin performance and outlook before we turn to Q&A.

Thanks, Mat, and good morning, everyone. As Mat mentioned, our total revenues grew by 5% on a constant currency basis. The difference between reported and constant currency revenues is driven by the strengthening of the pound relative to the euro U.S. dollar move year-on-year. Gross margin stepped up by 400 bps in the period, mainly driven by incremental inbound freight costs and higher clearance along with the annualization of Brexit duty charges, which will be fully annualized by the end of H1. Taking each of these in turn. The higher freight cost we've incurred in Q1 reflects continuation of COVID-related supply chain disruption, which was factored into our FY '22 guidance. The cost of ocean freight has increased versus last year. And whilst the ocean freight contracts we have in place have mitigated some of this impact, these were entered into in H2 FY '21, a when the market rates had already increased above that seen in Q1 last year. Another driver of the higher freight costs have been the higher cost of airfreight as we took action to accelerate our product intake ahead of the important peak trading month. Now turning to clearance. You'll recall that in P4, we experienced delays in the supply chain along the volatile demand influenced by poor weather in key markets, which left us with pockets of spring summer stock left over at the end of the season. To manage this, we have run additional discounts and clearance steps to clear product not sold during the Spring/Summer season. Turning to the shape of our gross margin profile for the remainder of the year. In terms of the rest of H1, there was a saving impact last year to gross margin level between P1 and P2. And although the trends remain similar, we don't expect H1 to have the same impact as P1. As we move into the second half, we expect the year-over-year impact of freight cost to alleviate in the second half of the year as we annualize our freight -- our ocean freight contract strength and as our freight mix normalizes. We expect the increased rates of markdown we have seen in P1 to be temporary as our stock profile continues to improve, and we are cycling higher levels of markdown incurred in the second half of last year. Therefore, we would expect markdowns to be lower year-on-year in H2. We take a low to mid-single-digit price increase to mitigate cost inflation going forward across both ASOS and partner brands. This will start to impact P2 onwards. As a reminder, we invested in price in H2 of last year in Europe and the U.S. to realign our price point locally. But as we add to prevailing inflation, we would expect pricing to have a more favorable impact in the second half of the year. We further expect intake margins to improve in H2, supported by the operational efficiencies we outlined at the CMD. On a technical point, you'll recall that Mat covered an overview of the work that we'll be undertaking in support of accelerating our strategic priorities, which will require us to change the way we work in a number of ways. As a result of this, we're expecting to incur costs that are one-off in nature. In addition to this, we will incur nonrecurring costs relating to volume from AIM to the Main Market. In total, across both buckets, we expect this cost to be in the range of GBP 10 million to GBP 13 million for the first half of the year, and we will update the further detail at the half year. In terms of our outlook, our guidance for the year remains unchanged. It's probably worth noting that given the mix of expected cost wins in H1 and the impact of the improvements in gross margin in H2, we're expecting the profit to be more weighted to H2 than normal years. However, we do expect to make a profit in H1. As a reminder, we guided for FY '22 sales growth expected to be in the range of 10% and 15%, with H1 revenue growth in mid-single digits. Our FY '22 adjusted PBT expectations are in the range of GBP 110 million to GBP 140 million. CapEx investment of circa GBP 270 million, and we expect free cash flow generation to be broadly neutral. And so in summary, we delivered 5% revenue growth in line with our guidance. We made continued progress against our strategic priorities with the successful pilot of Partner Fulfils, the soft launch of ASOS brand edits in Nordstrom store and online and grow more than 200% in the TopShop brands across our platform and wholesale year-on-year. Despite short-term uncertainty, our guidance for the year remains unchanged with revenue growth expected in the range of 10% to 15% and adjusted PBT of GBP 110 million to GBP 140 million. We'll now hand over to Q&A.

[Operator Instructions] Our first question comes from Charlie Muir-Sands from BNP Paribas.

I've got 3 brief ones, please. The first is whether -- could you please talk about how your proposition stood up over peak in the key warehouses markets. I was particularly interested in the U.K. I saw the odd bit of press suggesting that perhaps you weren't able to maintain next-day delivery for product coming out of Lichfield, and I don't know if that was a bit of a teething problem, for example? And the second question is noting your comment about rest of world still being dragged by delivery day. I wondered if you could just update us on how long it is taking you to get products to some of those far-flung places like Australia? And then third one is just on the guidance for the sales growth. Can you just clarify whether your guidance is reported or constant currency? Because -- sorry, my understanding was that the growth was in reported currency, but you are referencing the 5% being in line at -- using a constant currency reference?

Yes. So I can deal with all those queries. So just on the latter, I'd just like to comment on that, Charlie. We've always given guidance in constant currency along with most companies because currency is something that you can't control. So all guidance is in constant currency as is normal and expected. In terms of delivery days -- I mean it varies very much by territory. But if you talk about the major territories, you're -- again, you're probably talking between 3 days to 10 days, depending on exactly where it is and what kind of country. And again, it will depend on when you order in the week because what you're finding is planes go less often, therefore, the proposition is more variable depending on when somebody orders. In terms of how our proposition held up over peak, if I -- let me talk in general terms, and I can speak specifically about Lichfield. So overall, our proposition held up really, really well. In fact, we -- our proposition year-on-year was improved in the U.K., Europe and very similar in the U.S. Over peak, we normally remove NDD and go with the fastest service. So that's what we've done this year, but we also did it last year. In terms of Lichfield, as Lichfield is still in startup mode, we don't have NDD available through all carriers yet. So there are certain products that are being sold exclusively through Lichfield where currently NDD is not available, but that's as we anticipated and planned it as we ramp up and effectively one of the ways we ramp up is we add new carriers over time.

Our next question comes from Miriam Adisa from Morgan Stanley.

Three questions from me. Firstly, just on the gross margin. Could you just give us a breakdown of that 400 bps between the different elements that you mentioned? And are you still confident of achieving broadly flat gross margins for the year? And secondly, could you talk about the product mix you're seeing at the moment and also where returns now are relative to pre-pandemic levels, just given some of the commentary from one of your peers? And then thirdly, could you talk a bit about the learnings from the Partner Fulfils trials with that announcement? And if you could just talk about the type of product or brands that you're now looking to onboard and work with as you expand to Europe?

Yes. I'll get Katy to answer the gross margin question, and then I can pick up the other 3 quickly.

Sure. So from the 400 bps, just less than half is producing. With the other half mostly, the vast majority relating to the clearance mix that we talked about. Out of the clearance mix very roughly half is clearance [ depth ] with the other increase in actual clearance mix, if that makes sense. And as we discussed just now, the reason for the clearance is higher than normal levels of Spring/Summer stock due to the volatility of demand that we saw in H2 last year, but mostly in P4.

Do you want to talk about the H2 expectations a bit, again, maybe?

Sure. So as we guided for at the year-end results, we said that gross margin will be broadly flat for the full year, and that's still our expectation.

So just touching on your other points briefly, Miriam. In terms of product mix, we have seen a shift in our mix back into -- I guess, what we would characterize as going out wear and formal. Probably, the best way to explain it is that the mix sits somewhere between pre-pandemic levels and pandemic levels. So we've now where we see the demand go back to what we would characterize as a normal pre-pandemic level, and I think that reflects the level of restrictions and consumer behavior that we're seeing. But clearly, it's not at pandemic levels either. It's somewhere in between. In terms of returns rates, what we've experienced is the returns rates on a product-by-product basis are very much returning to the levels we would have seen pre-pandemic. We haven't seen any evidence of them returning to levels higher than pre-pandemic, in fact, very much in line and therefore, our actual returns rate is largely a function of mix. So -- and I guess that strong expectation is that, that normalization has taken place and will continue. Clearly, there's a bit of short-term uncertainty around at the moment because of kind of the way Omicron coincided with Christmas. In terms of the learning on Partner Fulfils, there were 2 reasons to run the pilot: One was to make sure that we could successfully execute, and it was a good experience for customers. And I think we're really confident with the way that, that experience takes that for customers. So in that sense, it gives us the confidence to move -- to roll it out, and that was one of the key elements of the pilot. In terms of where we're going next, clearly having a 5% of incrementality on just debt I think in to get the potential around some of our bigger brands. And so we are working with a number of our bigger brands to try and onboard then. Clearly, they'll come at different paces and different rates depending on the complexity of any technical integration that needs to take place. But we're also looking at how we roll that out to smaller brands as well. Our 2 focus areas in the next few months are to move to augmenting our stock profile with products that we don't stock and looking to expand the capability, as I said, from U.K. into Europe, because you need different regulatory requirements, et cetera, for Europe versus the U.K. So those are the 2 big focus areas that we would hope to have in place in the first half of calendar '22.

Our next question comes from Ben Hunt from Investec.

Just a couple of questions. Firstly, just this ability to manage on the one hand, raising prices for existing season coming in and on the other hand, discounting Spring/Summer stock in the second half of last year? And really, how much of the recovery in the second half is going to be from price increases? And how you are going to be able to manage that with this -- on one hand, not to say clearing something is happening in your prices. Are you having no problem selling through on increased prices at the moment?

So I mean in terms of impacts on second half, the year-on-year annualization of clearance will be -- we would anticipate being bigger than the benefits of pricing given the as we kind of move to a more normal environment from the -- we had a very polarized demand picture in the second half of last year, if you remember, with holidays not happening and festivals, et cetera. So I guess in terms of how to think about that clearance is probably the bigger chunk of it. In terms of pricing, we are -- it's relatively early days. So let me caveat what I'm about to say with that. But obviously, we're operating in a prevailing inflationary environment. And therefore -- and the way we're taking a very segmented approach to pricing. So it's not like we put up the price across our whole portfolio by X; we are looking at on a category by category basis to try and understand what the right level of pricing is. So overall, I think we feel relatively comfortable that the pricing that we've taken will be absorbed by the market by consumers. I think consumer are conditioned to expect it. But we'll obviously have to see how that evolves, but I feel relatively positive about that at this early stage.

Okay. Great. And then second question, the active customer growth has been [ muted ] for a while now. Just to what extent do you hope that marketing increases to getting customers onboard?

So I think -- I mean I think the customer growth reflects largely the annualization of really, really strong new customer growth last year, which would be a function of the fact that the vast majority of physical retail was closed. So in that sense, I think that's the biggest contributor to the customer statistics as we kind of annualize that period. In terms of marketing, we have invested more year-on-year but not disproportionately so in terms of the market -- marketing when you haven't got the best availability and stock profile, our expectation is that we will invest more in the second half of the year in support of our growth plans as our stock profile normalizes but also as we take the learnings from our test-and-[ learn ] approach to marketing. So I think probably the easiest way to think about it is that marketing year-on-year had a fairly immaterial impact in terms of driving different behaviors.

Our next question comes from Michael Benedict from Berenberg.

A couple from me, please. So firstly, when you set full year guidance, you did assume a softer H1 followed by a reacceleration in H2. I wondered if there's been any change to the supply or demand picture in that context? And the second point, just on how the start of Spring/Summer is looking from a product availability perspective, please?

Okay. So I mean in terms of the supply-demand picture, Actually, I mean I think I was trying to summarize overall, I think that the supply and demand picture is panning out largely as we would expected that it would. There's a bit of short-term uncertainties, we flagged around Omicron and what that does for the next few weeks. But I think as we look forward, I think we feel that from a demand perspective, we would expect year-on-year the demand environment to be better. We -- and certainly January, as you know. But it does feel like things like holidays, festivals, et cetera, are likely to be a reality of consumers' lives. So I actually feel relatively optimistic about the demand picture. I think the early signals are positive. For example, we just had a really good week on swimwear last week, which I think tells you consumers are starting to think about going on holiday and starting to -- so I think whilst it's early, I think the demand signals are relatively positive from an activity perspective. From a supply perspective, -- and it probably links to the second part of your question around the start to kind of transition into Spring/Summer. We are we are receiving products very much in line with what we would have anticipated as we move through kind of the peak period and into a period where there's probably less capacity constraints overall. And our full price sell-through over the last couple of weeks has been really, really strong. So again, I would say encouraging early signs. But it is January. And therefore, whilst I'm optimistic there's still an awful way to run before we can be more definitive. But good so far, I would say.

Our next question comes from Simon Bowler from Numis.

Two for me, if okay. First one, just come back to your kind of comments on mix earlier. Is your kind of expectation that as we move hopefully back into a more normal environment that the mix will go back to pre-pandemic levels? Or do you think kind of you sustainably got a larger business outside of the going out ranges? And are there any periods of kind of more normal from some of your regions more normal shopping behavior where you've seen that happen or otherwise? And then secondly, can you just kind of talk a little bit around kind of flexibility in your buy given the understandable reasons with the volatility we've had kind of clearance has been a bit higher than expected for the last kind of 6, 9 months? What flexibility you got to give comfort that shouldn't be the case over the summer?

Yes. So let me try and deal quickly. So in terms of mix, Absolutely, we think that we have built a bigger casual wear business than we had pre-pandemic. So in that sense, I'm not sure we expect mix to return to pre-pandemic levels, but we do expect going out demand as an absolute to return to pre-pandemic levels. So I guess we think that's quite a significant way to run on going out. So we would expect that to increase in the mix, but as you rightly pointed out, not necessarily in mix terms to the levels it was pre-pandemic because we've definitely got a bigger casual wear business. I guess the early signs -- and again, it's not a perfect proxy because there are still lots of moving parts around restrictions, et cetera. But if I look at somewhere like Germany over the last few weeks, we've seen a really strong pickup in going out, particularly in dresses demand, which is always an area where we're really, really strong in Germany, but we continue to see decent trajectory on casual. So I think that gives us some confidence that what we believe will materialize in the sort of slightly longer term is validated by what we're seeing right now. In terms of buying flexibility there -- I guess it's a sort of -- there is some -- we're driving as much flexibility as possible. but we're balancing that against the fact that obviously, supply lead times remain longer than in normal times. So we would enter the season with a fair amount of flexibility, particularly more so in Spring/Summer than in Autumn/Winter because of the nature of the product profile. So there's less -- something like coats and jackets, for example, has a lot longer lead time. So it's inherently more flexibility. We're looking to move as much product as we can to shortly to assist that flexibility, but there are slightly longer lead times. So if you kind of roll all that up, Simon, I feel we've got a reasonably good level of flexibility, particularly towards the back end of the summer season. So -- but I think the biggest thing that gives me confidence about our stock profile is we -- if you think about February, March last year, which is when we were crystallizing our Spring/Summer buy we were still in a world where actually we were all in full lockdown. So therefore, the demand uncertainty heading into last Spring/Summer was significantly higher than I think the demand uncertainty now where it feels like there is a much clearer picture. So I think I have a lot of confidence that the mix of our stock buy this year is somewhat more predictable than the mix of our stock buy last year where we were trying to effectively speculate between when there would be -- when we come out of lockdown, to what extent would we see holidays, festivals, all of those kinds of things. So I also -- I think in that sense, it's -- we're not out of the pandemic and I feel that I should touch on the fact we could have a new variant in at any point, but it feels to me like that demand picture, consumers have learned much more to live with the virus. You can see that in the going out trends. I think there's a much more stable picture.

Our next question comes from Georgina Johanan from JPMorgan.

Two questions, please. Just following up on the things you touched on already, if I may. First of all, just on returns rate. Just to clarify, because obviously you've been very clear that they are kind of similar to precrisis levels on a like-for-like basis. But you've said in the statement that returns rates have normalized, yet the mix is still quite different. So I'm just trying to understand how returns rates don't, therefore, remain lower overall at a group level? That's my first question, please. And then my second one, just on the gross margin, perhaps just to try and get some numbers around H2, given all of the moving parts. I mean my understanding is from the price increases that you've called out that, in theory, should be at least 100 basis points support year-on-year in H2. So am I right, therefore, in understanding that you're expecting the clearance reversals to be in excess of 100 basis points as well year-on-year in H2.

Okay. Let me deal with those quickly. So I mean on returns, there is just a casual wear going out because within that, you've got effectively a higher returns rate than child, et cetera, et cetera. So I won't comment on specifics. The easiest way to think about it is that our returns rate is around the level it was pre-pandemic. There might be -- and again, it will depend on half year. There might be 50 or 100 bps of favorability or something like that. It just depends on the mix. But it's not a material contributor to the situation in the way that we saw over the pandemic period. So it's not a big driver of financial performance in the way that it was during the pandemic period. Cost -- from -- again, let me -- I won't comment on your -- the specifics of your math because it will depend on exactly how the price increases move, et cetera. So -- but we would expect clearance to be, as I said, bigger than price increases. Directionally, you're probably slightly over on what you think the impact on prices is going to be. and clearance -- by clearance would be affected bigger. So I realize that's not a brilliantly open answer, but I think I don't think it's right to try and give you the specifics on the forecast into the future. But in terms of the mix, definitely see more as clearance than pricing.

Our next question comes from Anne Critchlow from Societe Generale.

Just one question from me, please, on marketing costs. Because we're hearing quite a lot about how marketing is producing lower returns on investment. So just wondering if there's a danger of marketing stepping up perhaps to more than you expected? I know you flagged sort of 6% of sales or slightly above. And whether you're seeing any variations by region in terms of returns on investment there?

I guess the really short answer on is that the returns on marketing that we're seeing are largely as we expect them to be. There are regional differences. There always have been. -- but I'm not concerned that we're in a -- it is only a P1 trading update, but I'm not in a situation where I think that we're expecting marketing to be materially different than we guided to at the recent Capital Markets Day straight full year.

Our next question comes from Simon Irwin from Crédit Suisse.

And apologies if you've already gone over this, but I had to drop out of the call. But can you just talk a little bit more detail about the rest of world, which markets are kind of being most impacted, how the proposition currently is kind of versus normal versus 6 months ago and how quickly you would expect kind of freight availability to improve in the coming months? And also just kind of related to that, how reliant are you on transatlantic airfreight these days? Or is the U.S. business now increasingly self-reliant?

So yes. Let me do -- the second one is quick. So we're not -- we don't extensively use U.S. air freight so that is not reliant as you think there some et cetera in particular stock package picture, but it's not dependent on that necessarily. So I'm not concerned about U.S. airfreight specifically. In terms of our rest of -- in terms of rest of world -- so actively, we got 3 -- a lot of markets, but there are 3 big chunky ones, Australia, Russia and MENA. In terms of competition, Australia remains the most impacted from a proposition perspective, and it's also where we probably think about [ charge ] improvement. And I think that because are established at the relativities of established local players versus our proposition is probably where we're most disadvantaged. In terms of meeting somewhere in between and then Russia is the least impacted. And Russia is where we've actually seen [ a cost reduction ]. So our thoughts within Rest of World does is quite [ strongly positioned ]. In terms of expectations on how quickly they go back [indiscernible] to predict, Simon. My sense is that -- and again, you guys will see the same statistics we do, but air passenger traffic, which is where most of our parcels would go as opposed to any inbound rate inflation shortfall feels like it's picking up more quickly than somewhere like Australia where you seeing but Australia is now open to clearance in a [ way similar to quarter 2 ]. I think I expect a slow, steady improvement, but I suspect that within the window of this financial year, it's unlikely to be completely back to normal, but I honestly don't know.

Our next question comes from Liv Townsend from UBS.

I just have 2. The first one is just on the U.K. where I think growth was stronger than the other regions. I'm just wondering if you can give any extra information around how that breaks down into new customers or whether it's sort of taking more share of wallet from existing customers? My second question is just whether you could give us some kind of indication on fulfillment and warehousing cost sales change year-on-year even as sort of just directional? Given I know the Black Friday I had some orders that were lessen 2 or 3 individual shipments, whereas before there would have been one. So just any indication there would be very helpful.

Sure. Yes. So on the U.K. customer breakdown, the bigger chunk of it is that the frequency of our existing customer base. So -- which is what we would have anticipated. So there would have been a number of customers who -- ASOS is where they go for their Christmas party outfit or whatever it might be. And so we've seen a pickup in frequency and we've seen really pleasing stickiness from the customers we acquired during the pandemic. However, having said that, I think we remain positively surprised by the new customer generation that we see in the U.K. So I think to be honest, we're really pleased with all of the customer metrics in the U.K. And if anything, I think we've been a little bit taken positively by surprise in terms of the strength of some of those metrics in the U.K. And I think that reflects the strength of our brand and proposition in the market. In terms of warehousing costs, so what you've experienced there, Liv, is that we are -- as we operate in Lichfield. There is a relatively small percentage of our deliveries that are now -- that were effectively split order where we've taken on order and we split it into 2. That was more extensive over peak than it would be in normal times. It's not a significant driver of where -- I mean that would actually sit in delivery costs. So it's exactly as we anticipated it would be. It's part of operational in warehouses and it's within the cost guidance that we've given as we expected. More generally on warehousing costs, the 2 big drivers of warehousing costs are, first of all, returns normalization because there's more handling in the warehouse as a result of that and clearly, that would impact delivery costs as well. And then as we pointed to at the full year last year, we are seeing pricing pressure on warehouse wages and warehouse inflation. So they're much bigger drivers than the split orders, which is, as I say, a relatively small part of our mix. You should -- I guess the only other thing to say is we've talked a lot about access for fields and our kind of approach to flexible fulfillment That, again, is utilizing a bit orders. Within both of those is a series of business rules to make sure that those activities are profitable to do. And it's servicing demand we wouldn't have otherwise been able to meet. So it shouldn't necessarily be unexpected if you receive split orders, but I say the percentage of the mix is relatively small.

That now concludes our Q&A session. I will now hand back to Mat for closing remarks.

I don't have major remarks than just to say thank you, everybody, for listening, and we appreciate your interest, and hopefully, everyone has a good day. Thanks very much.

Thank you, everyone, for joining. You may now disconnect your lines.