Still in fashion? Asos shares fall six per cent despite the online fashion retailer raising revenue forecast again

 
Rebecca Smith
Bucking the trend? Asos hasn't struggled in tricky market conditions
Bucking the trend? Asos hasn't struggled in tricky market conditions (Source: Getty)

Asos has bumped up its full-year sales guidance for the second time this year after "a strong set of results", weathering tricky market conditions for fashion retailers.

However, shares fell, with analysts citing cost headwinds and the news that full-year profit before tax expected to be "broadly in line with market consensus".

The figures

In its interim results up to 28 February 2017, the online retailer said revenues were 37 per cent higher than the same period last year at £911.5m, propelled by a 54 per cent rise in international sales to £548.4m.

Pre-tax profits increased 14 per cent to £27.3m.

The firm reported UK growth of 18 per cent, while overall retail sales rose 38 per cent on a reported basis, up 31 per cent on a constant currency basis.

Asos reported 23.3m orders were shipped - a 33 per cent increase, year-on-year.

Share slide

Despite the solid results, shares slumped nearly seven per cent to 5,563p at the time of writing. Retail analyst Tom Gadsby at Liberum noted Asos citing "a few cost headwinds", with the retailer mentioning one-off transition costs of a new distribution centre, Eurohub2, will be included within operating costs in the second half of the year.

Additionally Canaccord Genuity analysts said management pointing to various cost headwinds will "likely hold back upgrades today". While the retailer leads the market in terms of its customer proposition, "the cost of growth remains high and continues to rise".

The retailer's profit before tax is also expected to be "broadly in line with market consensus".

George Mensah at Shore Capital added that there had been a "strong rally last week prior to the announcement today", while Michael Hewson at CMC Markets noted Asos' UK margins have come under "significant pressure" due to heavy discounting in order to maintain market share.

Why it's interesting

The retailer has a spring in its step at the moment, after already upping its guidance in January following a very merry Christmas period, with a 36 per cent rise in retail sales for the four months to the end of December.

And now it said it expects annual revenue growth to be higher still, at 30 to 35 per cent, after previous estimates were 25 to 30 per cent.

In December, it announced it was creating 1,500 new jobs at its Camden headquarters, and things had been looking rosy, but today's announcement underlined the retailer isn't going out of fashion anytime soon, though investors may have already decided, as Michael Hewson at CMC Markets said, that "a lot of the good news may well be already baked in".

What the company said

Asos' chief executive Nick Beighton said:

International growth of 54 per cent has been excellent and with the rest of the world segment a stand out performer.

Customer acquisition, up 29 per cent, takes our active customers to over 14m. We passed the five million active customer mark in the UK, where we have shown solid sales growth of 18 per cent in a more promotional market.

Given the current momentum we are seeing, Asos is making good progress towards its ultimate goal of becoming the world's number one destination for fashion-loving 20-somethings.

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