Asos on fleek? Share price dips despite strong sales growth

 
Emma Haslett
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The company is aimed firmly at budget-conscious 20-somethings (Source: Getty)

Online fashion retailer Asos unveiled results ahead of expectations this morning, with retail sales of £446.9m in the four months to the end of December, up 22 per cent from last year. But that wasn't enough to impress investors.

The figures

In a statement this morning, the retailer said group revenue had risen 23 per cent to £459.7m (a 27 per cent rise on a constant currency basis).

UK retail sales rose 25 per cent to £206.2m (slightly down from last year's 27 per cent growth), while US sales rose 42 per cent to £49.7m, and sales in the EU rose 40 per cent to £111m.

That's largely in line with market expectations, although analysts pointed out that the 0.4 percentage point fall in its retail gross margin was disappointing.

Investors sent shares down 3.3 per cent to 3,074p in early trading.
Asos Asos | mobile image

Why it's interesting

Asos is that rare thing: a bellwether for both online retail and fast-growing retailers in the US and Europe. Thus, investors have their ears pricked for both Christmas trading performances and currency fluctuations.

The news was clearly good when it comes to Christmas: double-digit growth across most its international markets suggests those Christmas jumpers were flying off the (warehouse) shelves.

But a glance at its constant currency figures - which strip out fluctuations - suggest what could have been. US sales could have been up 35 per cent, while EU sales would have been up 40 per cent. And with the pound falling to a five-year low against the dollar last week, you can see why investors might be be spooked.

But the good news is that chief executive Nick Beighton, who replaced founder Nick Robertson last year, said the company is continuing to push ahead with expansion of its distribution facilities.

"We are progressing well with our warehouse and technology investments and in December construction began on our EuroHub 2 facility," he said.

What Asos said

Nick Beighton, its [new] chief executive, said:

UK growth remained strong at 25% per centand our improved international sales growth of 20 per cent (28 per cent on a constant currency basis) was underpinned by our continued price investments, further deployment of our zonal pricing tool and continued strong full price sales mix. As a result the retail gross margin declined by a net 40 basis points.

What analysts said

Analysts at Shore Capital Markets said:

With its strong offering in both menswear and womenswear... it is unsurprising the business achieved a record sales performance during the cyber weekend in late November 2015 and the consistency and increasing convenience of its proposition means strong trading likely continued in the run up to Christmas too.

We feel its offering in mobile is particularly a key factor within this performance, with mobile representing 65 per cent of traffic. We also note a triple digit increase in visits to the ASOS mobile app.

In short

More strong growth, despite market volatility.

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