Shares in Asos have increased by over 20% after the online fashion retail firm stated that it expects a "significant improvement in profitability" in the current financial year.

In its latest trading update, Asos said it also expects revenue growth to be in line with expectations, while its adjusted EBITDA is set to be ahead of expectations.

The update comes ahead of the fashion retailer’s first half-year results, which will be published on 24 April.

Asos added that, "encouragingly", its own brand full-price sales, which it described as "a core engine" of its customer proposition, returned to growth in the first half.

It stated that this was enabled by its "market-leading test and react model", which now makes up more than 15% of its own-brand sales.

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, commented: "The group gave a sneak peek into first-half trading ahead of its results on 24 April. Profitability looks set to improve significantly, albeit from a very low base.

"The group’s been working hard to clear excess inventory off its books and that’s starting to bear fruit in the form of less discounting and healthier profit margins. Alongside a tight grip on costs, EBITDA looks set to land ahead of market expectations of £34m in the first half.

"Despite the positive momentum, investors should keep in mind that there are still plenty of challenges to navigate as Asos attempts to turn its fortunes around. Key metrics like active customer numbers were heading in the wrong direction at the last count. And there’s plenty of competition from the likes of Next, Shein and Temu which could put downward pressure on pricing and weigh on Asos’ ability to rebuild its profitability."

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