DCSIMG

‘Stunning’ growth as Asos aims for global sales

Picture: Asos

Picture: Asos

  • by JAMES DAVEY and SCOTT REID
 

BRITISH online fashion star Asos maintained a heady rate of sales growth in its first quarter, buoyed by strong trading both in its home market and overseas.

The retailer, which targets young women looking to emulate the designer looks of celebrities such as Cheryl Cole, Tulisa Contostavlos and Nicole Scherzinger, said yesterday its retail sales rose 30 per cent to £165.8 million in the three months to the end of November.

That compares with analysts’ forecasts of about 29 per cent and growth of 31 per cent in the fourth quarter of the previous financial year, and reflects a 35 per cent rise in active customers to 5.4 million from 160 countries.

Asos, whose celebrity fans include United States First Lady Michelle Obama, said its retail gross margin fell 100 basis points year-on-year, reflecting a strong comparative period, the UK accounting for a larger percentage of total sales than initially planned and price cuts.

Chief executive Nick Robertson said: “We remain positive in our outlook and continue to trade in line with expectations.

“Once again the performance of countries where we have dedicated websites was significantly better than the EU performance as a whole.”

First-quarter retail sales in Britain rose 24 per cent to £62.1m, while international sales increased 34 per cent to £103.7m and now represent 63 per cent of total sales.

With the UK facing the prospect of a triple dip recession, many retailers have been finding the going tough as consumers fret over job security and a squeeze on incomes.

Asos, with its broad international reach, is managing to buck the gloom. Its shares have risen 82 per cent over the last year, hitting a record 2,571p in October.

The stock closed at 2,546p last night, a rise of 3.3 per cent and valuing the business at a heady £2 billion.

Bethany Hocking, a retail analyst at brokerage Investec Securities, expressed some surprise at the robust sales growth in the UK.

“We don’t expect this rate to continue given toughening comparisons,” she noted, “but it should go some way to silence ‘maturity’ arguments.

“We won’t be changing forecasts at this stage, but up our target price to 2,800p.”

Investec reiterated its “buy” recommendation on the shares.

John Stevenson, an analyst at Peel Hunt, which has a “hold” rating on Asos, said the firm’s “stunning” UK growth threatened margins. He said: “Asos has reported UK Q1 sales +24 per cent, the strongest growth in over two years, driven by re-pricing, service initiatives and favourable weather conditions.

“However, with UK sales delivering lower margins, this may impact full-year expectations if the mix of sales continues to favour the UK.”

Sanjay Vidyarthi at investment bank Espirito Santo, which rates Asos a “sell”, highlighted the “customer pull” nature of the company’s business model.

“Regional demand patterns will make quarterly trends volatile and difficult to forecast as each territory comes with a different cost of growth [gross margin and delivery costs in particular].”

 

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