34 2GM Thursday October 15 2020 | the times
Business
ted. However, senior executives have
warned that the US recovery is at risk if
Congress fails to provide significant
further fiscal stimulus.
Goldman Sachs and Morgan Stanley
have outperformed other US banks
during the pandemic because their
trading operations are comparatively
large and their loan books relatively
small. Traders usually are able to make
more money when markets are volatile.
The bank’s asset management reve-
nue soared by 71 per cent in the thirdChina stocks
recover to
their highest
in f ive years
Chinese equities are worth more than
$10 trillion for the first time in five years
after snapping back to life as Beijing
continues to patch up the world’s
second largest economy.
Domestic stocks in China have added
$3.3 trillion in value since their trough in
the spring, when the coronavirus out-
break restrictions paralysed much of
the country’s economy and crippled
factories across its industrial heartlands.
Their resurgence this week means
that China’s total market capitalisation
stands at its highest level since 2015,
according to data compiled by Bloom-
berg. Analysts have suggested that itCallum Jones Trade Correspondent
1
Supermarket rationing failed to
prevent empty shelves because
although shoppers were buying
only a little more than usual of the
products involved, including pasta
and toilet rolls, many more
households were buying them,
according to the Institute for
Fiscal Studies. Page 22
Policymakers in Britain must
do more to help people to find
jobs in order to boost
productivity and limit the long-
term economic fallout from Covid-
19, the Organisation for Economic
Development and Co-operationsaid. Page 33
3
Deloitte has resigned as
auditor of EG Group, the
petrol station company whose
owners have agreed a £6.8 billion
takeover of Asda, the grocery
chain, owing to concerns over its
governance and internal
controls. KPMG has been
appointed as EG’s auditor. Page 334
Profits at Asos have more
than quadrupled after
lockdown delivered a boom in
online shopping. Asos had a pre-
tax profit of £142 million in the
year to end of August, a big rise
from last year’s £33.1 million.5
Chinese equities are worth
more than $10 trillion for the
first time in five years after
bouncing back as Beijing
continues to patch up the
country’s economy. Domestic
stocks have added $3.3 trillion in
value since a trough in the spring.6
Governments should not
worry about the black hole in
their public finances until the
pandemic has passed and recovery
is established, the International
Monetary Fund has said. Low
interest rates have made high
public debt levels manageable and
policymakers should not rush to
fill the hole, it said. Page 367
A British company developing
electric vans for Royal Mail
has received a $118 million
cash injection. Arrival, which is
also developing zero-emission
buses, said that the investment
from Blackrock would help it to
expand its network of factories in
Europe and the United States.
Page 388
A further 362 jobs were lost in
the casual dining sector after
the closure of 26 Gourmet
Burger Kitchen outlets in a pre-
pack administration. The brand,
with 35 of its 61 sites, was sold to
Boparan Restaurant Group,
securing the jobs of 669 of the
1,031-strong workforce. Page 399
G4S said that its revenues
were down 2 per cent but had
“remained resilient... broadly
in line with 2019”. The security
company has attracted takeover
interest from at least two smaller
North American rivals. Page 4010
Revenue at Pearson fell by
a tenth in the third
quarter as a surge in
demand for online learning tools
failed to offset weakness in its
North American university and
international divisions. The world’s
largest education publisher said
turnover at its US colleges
business had tumbled by 15 per
cent between July and September.
Page 41Need to know
Asos quadruples
profits as it adds
3m new customers
Profits at Asos have more than
quadrupled after lockdown delivered a
boom in online shopping, with more
than three million new customers
flocking to the fashion retailer’s
website.
Asos made a pre-tax profit of
£142 million in the year to the end of
August, a big leap forward from last
year’s £33.1 million, when its growth
was hobbled by warehouse glitches.
Sales during this year have surged
by 19 per cent to £3.26 billion after
Asos increased its global customer
base to more than 23.4 million, includ-
ing seven million in the UK, and took
market share from traditional bricks-
and-mortar rivals.
However, despite beating analysts’
profit forecasts, the shares tumbled by
553p, or 10.3 per cent, to £48.25 yester-
day after investors were taken aback by
the company’s cautious outlook.
Nick Beighton, 52, chief executive,
said that without a Covid-19 vaccine,
the prospect of a second wave of cases
and increasing lockdown measures
meant it was “clear that a normal
pattern of social events is not going to
resume in the short term.
“We are worried about how unem-
ployment will fall on our twenty-
something audience and how their lives
may be disrupted.”
Asos is now valued at £4.8 billion,
nearly two and a half times the market
value of Marks & Spencer, having risen
by 37 per cent since the start of the year.
The Aim-listed company was founded
in 2000 as As Seen on Screen by Nick
Robertson, 52, grandson of the founder
of Austin Reed, the fashion label.
Yesterday Asos said that its profits
had benefited from a £45 million tail-
wind from Covid-19, largely thanks to a
significant drop in the rate of customer
returns as the pandemic dramatically
changed shopping habits.
In light of its strong results, Asos hascommitted to repaying £3 million of
taxpayer cash received to furlough
3,000 staff during the pandemic and
from the government’s loan facility.
Mr Beighton said that the business
had not worked through the implica-
tions of the government’s plans for a
2 per cent online sales tax, but he
argued that such a move would be “self-
defeating for the government as the tax
on online sales will be passed on to
consumers”.
The Asos boss added that it would be
“uncomfortable if one of the largest
online players is exempt from the tax”,
after revelations that Amazon does not
have to pay Britain’s new digital
services tax on goods that it sells itself.
The American online powerhouse is
obligated to pay the 2 per cent levy only
on revenues that it makes from third-
party sellers and has said already that
it will increase its merchant fees to
cover them.
Asos has launched a new lower-
priced range called As You, with items
priced between £8 and £28, in what Mr
Beighton said was “a nod to the
potential impact of recession”. He said
that the new range would be largely
manufactured in the UK by suppliers
that Asos had already vetted and
approved.
The company said that it was pre-
pared for a “promotional” market and
had increased its range of sportswear,
casual clothes and beauty and make-up
brands, which have been popular dur-
ing lockdown and have naturally lower
return rates.
The business plans to invest between
£170 million and £180 million next year
on its fourth so-called fulfilment
centre, in Lichfield, Staffordshire. It
said that while it had stripped out
£50 million of costs, it would spend
between £170 million and £180 million
this year on technology that would
mean it could ship products to custom-
ers directly from third-party brands’
warehouses.Ashley Armstrong Retail Editor
Goldman profits point to US recovery
Profits at Goldman Sachs nearly
doubled in the third quarter, trouncing
forecasts and adding to evidence that
the American economy has recovered
more quickly than had been thought
from the darkest days of the pandemic.
The US investment bank reported its
strongest annualised return on equity
— a key indicator of a bank’s per-
formance — for a decade in the three
months to the end of September of
17.5 per cent. Third-quarter profit
climbed to $3.5 billion from $1.8 billion
a year earlier, as revenue rose to
$10.8 billion from $8.3 billion.
The increases were driven by stellar
results from its asset management and
bond-trading businesses.
Goldman Sachs is the world’s best-
known investment bank. Its perform-
ance is an indicator of the health of the
American economy and of inter-
national financial markets.
The results from America’s largest
banks have been stronger than expec-quarter compared with the same period
last year to $2.8 billion, reflecting big
gains in its equity and debt investment
portfolios. Revenue from fixed-income,
currency and commodities trading
jumped by 49 per cent to $2.5 billion, as
equity trading revenue climbed by
10 per cent to $2.1 billion. The shares
closed up 30 cents, 0.1 per cent, at $211.11
in New York last night.
Bank of America, the second largest
US bank, reported a 16 per cent fall in
third-quarter profits but still beat
analysts’ forecasts. Wells Fargo, the
third biggest US bank, returned to
profitability after announcing an unex-
pected loss in the second quarter.
Bank of America’s third-quarter
profit fell to $4.9 billion from $5.8 bil-
lion a year earlier, as revenue dipped to
$20.3 billion from $22.8 billion. Its
shares closed down by 5.3 per cent, or
$1.32, at $23.63.
Wells Fargo’s third-quarter profit was
$2 billion, down from $4.6 billion a year
earlier. Its shares fell by 6 per cent, or
$1.48, to $23.26 last night.James Dean US Business Editor
Asos’s budget As You range features items pric
Behind the story
W
hen Asos tapped
investors for
emergency cash
in April, the
online retailer
was fearful that the halting of
festivals, weddings and holidays
during the pandemic would
massively damage its sales
(Ashley Armstrong writes). What
Asos — and, indeed, most of the
industry — didn’t expect was that
its customer base of
twentysomething shoppers would
quickly get bored at home and
would use their furlough cash to
buy “stay-at-home” outfits in
which they could lounge on the
sofa or do workouts.
Shoppers also have been
making more deliberate
purchases, a change of habit
among Asos’s young customers,
who typically buy several dresses
for a special occasion and keep
only the one that suits them best.
Sales of Asos sportswear has
risen by 50 per cent this year.
About 40 per cent of Asos
orders were returned last year,
but during the pandemic the rate
of returns has plummeted,
leading to a £45 million “Covid
tailwind” that has accounted for
about a third of Asos’s profit
growth this year.
The drop in returns can be
explained in part by a reluctance
among people to make trips to
the post office at a time when
they have been urged to stay
indoors, but mostly because the
fit of a hoodie or a jogging
bottom is less important or
noticeable than that of a cocktail
dress is, so there are fewer orders
with multiple sizes.f
Goldman Sachs confounded forecasts
by doubling profits in the third quarter