Nick Bubb’s verdict: Asos - UK good, overseas bad?

The City is a hard taskmaster and it found reasons to be disappointed in Asos’s overseas sales growth today, but there’s no stopping the UK.

With most of the Asos business now coming from overseas, it is not surprising that the stock market focused on the disappointing overseas sales growth of “only “38% in the last four months when Asos reported today. And that has been used as an excuse to knock over 5% off the share price, although with a market cap of nearly £6bn Asos is coming off a high base.

Oddly enough, Asos was expected to show about 35% retail sales growth overall in the latest trading period and it actually beat expectations with 38% growth overall, to £336m, even though the mix was very different to the one expected.

The UK was again much stronger than expected for Asos (as has been the quarterly pattern for most of 2013), with 37% growth in the period, but overseas was weaker than expected overall, despite stellar 69% growth in Europe.

The performance in Europe reflected particularly strong sales growth in Germany (which seems likely to be the home of the new European distribution warehouse) and in France.

In Germany, the enhanced payment systems launched in August attracted more customers and Asos also appears to have gained good PR for its appearance on the German fashion reality TV show Fashion Hero that started in October (Anne Rech, the senior marketing manager for Asos Germany, was one of the three ‘buyers’ bidding for the young designers’ looks on the show), whilst in France next day delivery options and the Asos Premier service pulled in a lot more business.

The stock market’s focus today was on the weak looking 28% sales growth in the US for ASOS (notwithstanding very strong 56% growth in the same period last year) and the growth of only 19% in the ,Rest of World’ (principally Australia, which has been hit by currency issues).

Some muted noises about the launch of the new website in China didn’t help Asos’s cause, but not every region can do well every quarter although it is in the nature of the City to pick on the weak things and shrug off the strong things.

But it would be wrong to shrug off the impressive 37% sales growth in the more developed UK core business for Asos in the period, as that compared with 28% growth at the same time last year.

That reflected the late shopping surge in December, which Asos could cater to with later delivery options, but it was also helped by the work that Asos has done to improve the value of its young fashion range, for instance by pushing high street brands like New Look.

How did the Asos UK sales growth of 37% in the period compare with other retailers? As usual, different reporting periods and different starting bases confuse analysis of the big multichannel retailers who have given updates since Christmas.

Marks & Spencer famously claimed that its general rerchandise online sales were up 32% over the eight week Christmas trading period, “well ahead of the market”, but it seems to regard the BRC Online Monitor as ‘the market’.

The BRC online figures don’t appear to include Amazon, but they are thought to include Asos and the BRC said that overall online non-food sales growth was 19% last month.

Debenhams announced 27% online sales growth for the 17 weeks to December 28 and this accounted for nearly 16% of its total sales in the period, although it didn’t save it from a profit warning even if it helped to grab the attention of a certain Mike Ashley.

House of Fraser preferred to focus on the three weeks to December 28 and trumpeted 58% online sales growth in the period (led by beauty), a performance which apparently impressed no less a retail personage than Phil Clarke of Tesco.

No doubt fast-growing pure-plays in online fashion will turn out in due course to have beaten Asos’s 37% UK sales growth in the Christmas quarter, but at this stage it looks a pretty good performance.

Chief executive Nick Robertson will be hoping that all the work taking place this year to extend and automate the Barnsley warehouse doesn’t result in any temporary drop-off in service for UK customers of Asos.