Bestseller sees celebrity fashion firm Asos as perfect fit

By PETER RANSCOMBE
Published on 16/09/2012 00:00

DANISH clothing retailer Bestseller will continue building its stake in online fashion retailer Asos, according to analysts, stoking further talk of a possible takeover bid.

Asos, or “As Seen On Screen”, has enjoyed rapid growth by selling clothes that allow its customers to dress like celebrities, such as television presenter Alexa Chung, NDubz singer and X Factor judge Tulisa Contostavlos and fashion model Kate Moss.

Bestseller, also known as Aktieselskabet, last month increased its stake in the Aim-quoted stock from 25 per cent to 26 per cent. But analysts believe the Danish firm will increase its holding again.

Taking a stake above 29.9 per cent would trigger a mandatory bid for the company.

“We note leading shareholder Bestseller has recently increased its stake to 26 per cent, providing further momentum to the share price,” said Peel Hunt analyst John Stevenson. “No doubt Bestseller may choose to raise its stake to the maximum level.”

This week’s fourth-quarter results from Asos are expected to reignite talk of a possible takeover bid from Bestseller.

Stevenson has lowered his recommendation on Asos from “buy” to “hold” following the recent good run for the stock but raised his target price from 1,800p to 2,100p.

He said the stock had been “oversold following a weaker-than-expected second-quarter trading update”.

“With little chance of upgrades in the short term, as international growth rates also begin to moderate against tougher comparatives, we believe the shares may struggle to make significant headway and we cut our recommendation back to ‘hold’ for now,” Stevenson said.

But Investec Securities analysts Bethany Hocking and David Jeary headed in the opposite direction, increasing their recommendation from “hold” to “buy” and set their target price at 2,450p.

“Asos is already the second-most visited fashion website globally amongst its target age group,” they said. “An assessment of the composition of internet users shows a lot more to play for. Asos leads the way in customer interaction, supported by sub-sites Fashion Finder and Marketplace. This should support ongoing market share gains.”

Andrew Wade and Matthew Taylor, analysts at Numis Securities, believe Asos has “built a moat” to differentiate it from its rivals, including its “genuine fashion credibility, savvy marketing, range of third party brands and own-brand ‘fast fashion’ products”.

They retained their “buy” rating on the stock.

As well as offering the styles of clothes worn by celebrities, Asos has recently started to win some high-profile fans, including America’s First Lady, Michelle Obama, and her daughters, Malia and Sasha.

Bestseller did not return calls for comment.