Global online fashion store ASOS (ASC:AIM) rises 0.3% to £51.69 as it sets a new and ambitious £2.5 billion annual sales target. Reassuring interim figures to February, remiss of any more negative surprises following last month's sales stumble and profit downgrades, also foster positive sentiment towards the stock.
Confident boss Nick Robertson, highlighting 36% growth in the retailer's active customer base to 8.2 million shoppers as well as growing website visits, conversion rates and average basket value, is unapologetic about stepping up the pace of spending on everything from warehousing to IT in order to grab global market share.
'This increased pace of investment has reduced our profitability in the period, but will deliver significantly increased capacity as well as efficiencies in the longer term,' enthuses Robertson. 'ASOS is not and has never been about the short-term; the scale of the global opportunity remains as exciting as ever and we are investing for the many opportunities ahead.'
Coming so soon after last month's (18 Mar) second quarter trading update, which revealed a disappointing sales stumble and weaker-than-expected margin guidance, there are no major surprises in today's numbers. Taxable profits are 22% lower at £20.1 million, in line with forecasts downgraded last month to reflect increased warehousing investment and bigger than expected losses in China.
As already reported, retail sales grew 34% to £472.3 million, driven by robust, though softer-than-hoped growth of 32% in the UK as well as a 35% international revenue rise. ASOS' increasingly international dimensions – over 60% of sales are generated overseas – means foreign exchange fluctuations are becoming more important. Accordingly, the Aim giant's top-line progress was crimped by foreign exchange headwinds in Australia and Russia in the second quarter.
For the year to August, N+1 Singer looks for 20%-plus growth in adjusted taxable profits and earnings per share to £70 million and 62.8p respectively. On these estimates, ASOS still trades on a punchy prospective price/earnings ratio of almost 83 times. By 2015, the broker, with a 'hold' rating and £53 published price target, sees profits and earnings surging ahead by another 36% higher to £95 million and 85.3p.
Panmure Gordon looks for £65 million taxable profits and 59.66p of earnings this year. 'The rating is starting to look more appealing but for now we reiterate our hold recommendation and £60.51 target price,' writes the broker. Elsewhere Numis Securities' retail-watcher Andrew Wade, with a £75 price target and 'buy' rating, sees 'the recent pull-back as an excellent buying opportunity'.