Nomura downgrades Asos despite strong Q2 sales

13th Mar 2015 10:54

Asos's share price pulled back slightly on Friday after a massive jump the previous day as Japanese broker Nomura cut its stance on the shares from 'buy' to 'neutral' despite a forecast-beating second quarter from the online fashion retailer."With some regret - as the Asos equity story excites - we believe it is appropriate to cut our rating to 'neutral' as it is early days in the Asos recovery story and the shares have performed well," said analyst Fraser Ramzan.Retail sales jumped 19% in the three months to 28 February, some three percentage points ahead of Nomura's prediction, driven mainly by a surge in the UK and a pick-up in organic growth overseas.However, Ramzan pointed out that full-year profit forecasts remain unchanged given that investments in zonal pricing and lower prices have hit margins, which declined 270 basis points (bp) in the first half."Although the group has maintained its -100bp FY retail gross margin guidance on easy 2H comps, it has flagged that if current response rates continue, it might increase price investment (given the depreciation of EUR vs GBP in recent weeks, this may be required, notwithstanding potential sourcing gains from the same cross rate)," the analyst said.He said that while the group's second-quarter performance raises confidence in medium-term growth expectations for Asos, "Q2 is not enough to change our fair-value basis".The stock was down 3% at 3,590p after a 23% jump on Thursday.