Asos "back on the front foot" as H1 results impress, says Numis

1st Apr 2015 09:13

Asos is building momentum and making "significant progress", according to Numis Securities, after first-half results came in ahead of expectations.The broker, which reiterated a 'buy' rating and 4,000p target price for the stock, said the online fashion retailer is "back on the front foot".Pre-tax profit fell 10% year-on-year to £18.0m as the retail gross margin fell 270 basis points (bp) to 46.8% given recent investments. However, this was much better than the £16.3m consensus forecast.Sales rose 14% in the first half and Numis reckons that growth will pick up to 17.8% for the full year. Margin declines are expected to stabilise before returning to positive territory, with the full-year estimate at -100bp.However, the broker said it sees scope for upside given the positive reaction to price investments and benefits from warehousing progress.Numis said: "Asos continues to drive improvements in its customer proposition, underpinning progress in engagement metrics (visits, order freq, average basket), with 150 new brands added, a re-focused 'top end' offer, 50 brands now priced in-line with local markets, local mobile apps in six key territories, product recommendation launched on mobile, and ongoing delivery enhancements including later cut-offs, next-day delivery to more countries, development of the EU PUDO network and a free returns trial in Netherlands."Other operational progress is being made, including the upgrade of its Barnsley warehouse and Eurohub ramp-up in Berlin.The broker said that despite a strong recent run in the shares - the stock has jumped 41% over the last three months - it still retains a positive stance.The stock was up nearly 7% at 3,879p by 09:56.