Deutsche Bank downgrades ASOS to 'hold'

17th Sep 2014 11:19

Deutsche Bank has lowered its stance on ASOS from 'buy' to 'hold', saying that the online fashion retailer is attempting to maintain growth at the expense of its margins.A profit warning from the company on Tuesday saw shares sink 10.5% to 2,131.17p, as it warned that profits in the year to August 2015 would be at a "similar level" to the year just finished.While pre-tax profit in the financial year just gone will be in line with market expectations of around £45m, next year's profits will be affected by "significant investments" in international pricing and its logistical infrastructure and technology platform, ASOS said. Markets were expecting a figure of around £63m for next year.Deutsche Bank said that while its expectations for the year just gone remain unchanged, margin guidance has been cut "as the company plans to aggressively address the deteriorated international price position"."We lower our forecasts by circa 23% and, pending better visibility on the execution and success of this strategy, we downgrade to 'hold' with a 2,400p target," the bank said. The target price has been reduced by a third from 3,600p previously.The shares were a further 2% at 2,163p on Wednesday morning.