THE phenomenal returns generated for investors by online fashion firm Asos – which has turned every £1,000 invested a decade ago into £1.3 million – have reached fresh highs ahead of trading figures expected this week.
Shares closed on Friday at 5,219p, compared to the 4p they were trading at in 2003.
Scottish fund managers Standard Life Investments (SLI) and Baillie Gifford are among the company’s biggest institutional investors and their stakes have led to gains of tens of millions of pounds for investors in recent years. Their funds each own about 5 per cent – worth about £215m – in the £4.3 billion company which is billed as a “fast fashion” retailer with ranges styled on clothes worn by celebrities.
Despite Asos shares already more than doubling this year – adding £2bn to its market value – several brokers have recently upped their forecasts with Exane valuing the shares at 6,000p and Panmure Gordon a shade under at 5,950p. The company – whose name stands for As Seen on Screen - is expected to report on more solid trading on Thursday after recently notching up its best UK sales growth in four years. In July founder and chief executive Nick Robertson said the business “continues to fire on all cylinders”.
The appeal among its core twenty-something customer base has shown no signs of waning, with the firm reporting a 39 per cent leap in UK sales and 48 per cent hike in international revenues over its third quarter to 31 May, driving a 45 per cent hike in total retail sales.
Its UK performance was the best since the third quarter of 2009, after it launched a free delivery and returns offer. Analysts at UBS said Asos was on to a “winning formula”. “The Asos strategy to continuously improve the customer offer across geographies is paramount for sustainable market share gain and sales growth,” they added.
UBS is pencilling in a slowdown in sales growth over the fourth quarter to 30 per cent for the UK and 37 per cent overall as it comes up against tougher comparatives from a year earlier, but said the “strong trend” will continue.
Asos reported an 11 per cent leap in pre-tax profits to £25.6m in the six months to the end of February.
Deutsche Bank is predicting a 33 per cent rise in full year pre-tax profits to £53m.
Asos, which was founded in 2000 and has 6.5 million customers, is aiming to reach a £1bn sales target by 2015.
SLI’s stake in the firm is held through trusts including the UK Smaller Companies Trust managed by Harry Nimmo. The dramatic growth in Asos’s share price catapulted it to the largest holding in the fund, now representing some 5.6 per cent of its assets.
Nimmo first bought into the company early in 2006 when the share price was just 86p.
He had highlighted the potential of the shares in an article for The Scotsman in 2008 when the shares were trading at 327p.
This week will also see High Street rival French Connection update with progress on its revival progress. The chain, which reports half-year figures on Wednesday, recently revealed “broadly flat” UK and European retail like-for-like sales in the first quarter – a marked recovery from the 7 per cent plunge in the previous financial year.
Analysts are expecting a further pick up in the second quarter thanks to a well received spring/summer selection and in-store changes.