Asos to “remain positive” thanks to UK impulse

The beloved British e-tailer did not disappoint the market or shoppers as its shares rose to a record price in London trading on Tuesday, after Asos posted accelerated second-quarter sales. Total retail sales rose 37 percent to 186.5 million pounds

(Rs 1,530 crores) in the three months ended Feb. 28.

The largest UK online fashion retailer overcame the median estimate of a 35 percent increase from five analysts compiled by Bloomberg when it saw a 37 percent increase. Asos’ growth was 30 percent in the first quarter. The retail gross margin fell 0.5 percent as the company sold more clothes than expected in the UK, where it has a lower margin than internationally because of the burden of value-added tax, explained the company on Tuesday.

The retailer said it expects the retail gross margin, a measure of profitability, to improve during the year as last year’s price investments aren’t repeated and it improves sourcing. The executive doesn´t expect another “step-change” in discounting like last year when it cut the price of its own- label ranges to lure shoppers. However, Still, Asos will be “forever tweaking” prices, CEO Nick Robertson recognised in an interview.

“Turbo-charged global online success”
Analysis firm Prime Markets has labelled online fashion retailer ASOS as a "turbo-charged global online success story", recommending investors to 'buy'. Geographically speaking, Asos has profited from the main European markets such as Germany and France, but has reported the strongest performance within its home country, the UK.

In the same vein, and aimed to replicate the success in its strongest European spots, country-specific websites in China and Russia are on track to open this year, Robertson said, with India and South America next on the agenda after.

"ASOS is today delivering exponential growth numbers to excite even the most seasoned emerging market trader, and in the view of Prime Markets continues to offer massive upside potential." UK crowns Asos performance


“Our UK performance remained ahead of expectations” at 28 percent sales growth, “with particularly strong trading during the peak December period,” Chief Executive Officer Nick Robertson said in the statement. Hence, “We remain positive in our outlook for the year” through August.

Asos shares rose as much as 7.1 percent in early London trading to the highest intraday price on record and were up 6.5 percent at 3,314 pence (Rs 2,719.3) at the beginning of the session, right after presenting its figures. Asos stock has gained 23 percent up to date, setting the company´s market value at 2.73 billion pounds (Rs 22,402 crores).

While the market remains “challenging across the piece,” shoppers are starting to increase basket sizes again in the UK and its offering fewer discounts, Robertson said in a phone interview with Reuters.

Canaccord Genuity lifts ASOS to buy from hold, target 3,400 pence (Rs 2,789.9) from 2,600 pence (Rs 2,133.6). “With investment in new territories rising, and the UK lapping its price incentives, margins and growth should rise in the second half and beyond,” pointed out Wayne Brown, an analyst at Canaccord Genuity, in a report issued Wednesday. Backing up his analysis, Brown has upgraded his recommendation from ‘neutral’ to ‘buy’.

In the same breath, Matthew McEachran, a retail analyst at N+1 Singer, said: "Today's update is a great achievement, and testament to the strengthening of the proposition afforded by better stock control, buying and warehousing efficiencies." N+1 Singer had its ‘hold’ rating reiterated on the stock in a note issued to investors on Wednesday. They currently have a 2,600 pence target price on the stock.