Asos trading update: What the analysts say

“Asos has once again produced a robust set of results. Although growth has slowed, the performance is no doubt the envy of rival fashion retailers. While international markets remain the engine of growth, the performance in its maturing and highly competitive domestic market remains acceptable. Conquering Russia and China is vital to growth ambitions, and performance to date suggests the retailer’s ability to adjust its pricing and merchandise by geographical zones is paying off. In understanding the drivers and influencers of online spending in each of its markets, Asos has created a strong platform on which to build lasting brand loyalty.” Malcolm Pinkerton, research director – E-commerce, Planet Retail

“Although these results represent a slight tempering of growth from the giddy heights of Asos’s stellar Christmas performance, a minor loss of momentum should not detract from an upward trajectory which has seen the fashion etail powerhouse post stratospheric numbers in recent times. That the UK results still demonstrate such positive movement in a market where Asos should be approaching something akin to maturity is all the more impressive this time around given it is facing off against tougher comparatives - it has now been 12 months since the company launched its digital marketing offensive. It is constantly looking to pioneer new initiatives to improve its offer to consumers and in doing so it has become the yardstick for online and multichannel fashion retailers to aspire to.” David Alexander, Conlumino retail analyst

 “In the context of a short eight-week trading period and £1bn full year sales base, we would not read too much into the Q2 shortfall. Demand over February was somewhat weaker following the strong Q1 performance, and we expect March to have picked up again with the warmer weather conditions. The US is notable in its accelerating performance. We had expected the US to remain more subdued until the introduction of zonal pricing in two to three weeks’ time, which will allow the US to run a much more brand-competitive offer.” John Stevenson, analyst, Peel Hunt

 “The company, we believe will now focus on a limited number of markets with a view to making them as significant as the UK rather than taking a scatter gun approach to global expansion. This will be done with the development of a small dedicated infrastructure in each of these developing markets. In the UK, it now has all the major international brands on its website apart from Top Shop, Zara and H&M and is now in a better position to optimise the profitability of its brands. It is also looking to develop another brand to exploit the middle aged market keeping the Asos brand focused on the under 30s.” Freddie George, analyst, Cantor Fitzgerald

“When a stock is as highly valued as Asos, it’s a big ask to disappoint on both the top-line and the bottom-line, in the short-term, so investor patience is likely to be tested today.  The short 2-month Q2 period that Asos report on today doesn’t tell us that much, but the market will be looking for trends and although, given the tough comps, sales growth was expected to slip back (particularly in the UK) there may be some disappointment with “only” 26% growth. The market was looking for group Retail sales growth of about 28%, with the UK up 20%, Europe up 50%, the US up 40% and the Rest of the World (mainly Australia) up 18%. Nick Bubb, independent analyst