ASOS shredded after overseas sales growth disappoints

published 26 April 2012

Fast growing online fashion retailer ASOS did not grow fast enough for the City's tastes in the final quarter of its financial year.

Group revenue increased to £127.1m in the three months ended 31 March 2012 compared to £96m the same period a year earlier. That figure was well below the £138.4m expected buy the market.

Retail sales in the quarter increased 34% year on year, UK sales rose 4% and International enjoyed a 63% surge. International sales now represent 62% of total sales.

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Broker Panmure Gordon had predicted a 52.5% increase in retail sales, with the UK up 9.6% year-on-year and International sales up 93.5%, so it is clear that overseas sales did not match up to high expectations.

Chief Executive Officer Nick Robertson said he was pleased with the group's fourth quarter performance for both its UK and International businesses against particularly strong year on year comparatives.

Profit before tax and exceptional items for the full year to March 31st 2012 is expected to be in line with expectations, he added. The company intends to change its fiscal year end to August 31st, which means its next set of results - due to be announced by the end of October - will be for a five-month period.

Investec noted the top-line miss and also the group's confidence it would hit full year profit expectations, and said it would not be making any change to its full year earnings forecasts as a result. It is sticking with its "hold" recommendation but said its 1250p target price is under review.

ASOS, which has started new web sites in Italy, Spain and Australia concluded, "We remain committed to our global expansion plans and approach the new financial year with confidence."

The Aim-listed firm said retail gross margin is significantly ahead year on year.

"We understand this improvement is somewhere in the region of 400bps [four percentage points], resulting in FY [full year]Retail gross margin up c.290bps. For the full year, stock management is tight, with a resulting working capital outflow and cash balances are strong," Investec noted.

Peel Hunt retail analyst John Stevenson observed that the "international run rate has slowed to +63% in Q4 [fourth quarter] vs +85% cons[ensus] (£12m miss in absolute terms) against strong comparatives."

Stevenson is sticking with his "buy" recommendation, saying "while we do not believe there is cause for concern, we expect a negative share price reaction given the stock's rating."

He was not wrong on that score; the shares shed more than two quid to slump to £13.95p