LONDON (Reuters) – British online fashion retailer ASOS is spending $40 million on a second U.S. distribution center to support strong sales growth in what it hopes will become a major market.
Established in 2000, ASOS is Britain’s most valuable online fashion retailer, with a market capitalization of 5 billion pounds ($6.5 billion), annual sales of 1.4 billion pounds and expanding operations in markets from Australia to Russia.
Chief Executive Nick Beighton said the new center in Atlanta, Georgia, will open in autumn next year and enable the company to offer faster and more flexible delivery to its 20-something customers.
“This agreement is a major step forward for ASOS in the U.S. and demonstrates the opportunity we believe lies ahead in this key market,” he said on Tuesday.
At the moment, ASOS dispatches about 25 percent of its U.S. sales from its center in Ohio with the balance coming from Britain, according to Liberum analyst Wayne Brown.
ASOS sales in the United States in the year to the end of August 2016 were 179 million pounds, a fraction of its overall revenue and dwarfed by online market leader Amazon, which is also investing heavily in fashion.
Amazon’s clothing and accessory sales are expected to grow nearly 30 percent this year to $28 billion, according to Cowen & Co forecasts quoted by Business Insider. Morgan Stanley has said it is second only to Walmart in the category.
The U.S. company recently launched Prime Wardrobe, a subscription-based service that allows customers to try items from brands such as Calvin Klein, Adidas and Levi’s as well as Amazon’s private labels.
ASOS, however, is seen as being partly insulated from the Amazon threat by its focus on young fashion followers and higher sales of its own-label clothes, which helps it trade at a premium to European rival Zalando.
It said last month that its U.S. sales grew 26 percent in four months to the end of June as it increased its full-year growth forecast for overall sales to the upper end of a 30 percent to 35 percent range.
Liberum’s Brown, who has a “buy” rating on the stock, said the new U.S. facility would support the company’s aim of achieving total sales of 2.5 billion pounds, which he expected it to deliver in 2019.
Shares in ASOS, which have risen 29 percent in the last 12 months, were trading down 0.2 percent at 5,990 pence at 0947 GMT.
Reporting by Paul Sandle; editing by David Clarke