Asos finishes year in style as Europe and US star in Q4 - UPDATE

19th Sep 2013 07:47

Rapid growth in Europe and the US helped online retail star Asos beat fourth quarter forecasts to wrap up the year in style. Chief Executive Officer Nick Robertson said pre-tax profits for the year ended August 31st would be "marginally" above expectations.The AIM-listed company, which is large enough for the FTSE 250 with its increasingly chic shares pushing its market capitalisation up to £4bn, lifted retail sales 47% to £208m in the fourth quarter to produce a 40% increase to £754m for the full year. With active customers now standing at 7.1m, retail sales continued to grow strongly during the fourth quarter in both the UK at 49% and international markets at 47%, where European growth of 73% and US at 59% were the stars. Robertson said: "International growth continues to be driven by the countries in which we have dedicated websites and in-country teams, and was particularly strong in Europe, driven by France, Germany, Italy and Spain." Asos also saw strong growth in Russia, following the launch of a new website.International sales contribute 64% of total retail sales over the period, compared with 65% last year, which Robertson pointed out reflected the strength of the UK business during the quarter. The Camden headquartered company has annualised last year's price investments enabling retail gross margin for the quarter to grow by almost 460 basis points year-on-year, allowing further investment in the customer offer. Analysts were almost universally gushing in their praise for the company, although maintaining a 'Hold' recommendation, Matthew McEachran at broker N1+ Singer was encouraged but remained tepid in his enthusiasm."ASOS has emerged more strongly than even we anticipated after its re-investment phase, leveraging buying, mark-down savings and warehousing efficiencies and reinvesting in quality, design, price, service and marketing." "This has seen growth rebound domestically, despite its relative maturity, and international momentum has also built where local teams and website have been launched. These localisation plans are ongoing and should see growth rates step-up in certain core markets." Canaccord Genuity was more enthusiastic, suggesting a target price of £80 is possible. Analyst Wayne Brown said the group's enviable track record of generating super-normal returns has been achieved whilst growing its invested capital base at circa 19% a year."We do not believe traditional valuation metrics are appropriate to value Asos," he said. "Applying a compound growth rate of circa 28% per annum over the next five years - with a flat margin profile - delivers our new target of 6,200p, previously 3400p). Were we to flex the margin to its long term 8% EBIT - up 100bps from current forecasts - our target would rise to circa 8,000p." OH