Asos results: what the analysts say
Asos today posted another year of stellar growth, driven largely by international expansion. Results came in slightly above expectations and the company looks set to continue to grow. Here is a flavour of what leading retail analysts are saying about the news.
Matt Piner, Lead Consultant at Conlumino:
"Despite impressive growth in the UK, it is globally where the real opportunities continue to lie. International sales mix is up from 59% in 2011 to 65% in 2012 and ASOS is emphatically demonstrating how its offer can be rolled out to other continents. The retailer's offer is built on a functional and effective website, a strong mix of brands, flexibility in delivery options and an increasingly strong reputation as the online destination for fashion shopping. These strengths have helped ASOS to reach the milestone of 5 million active customers across 160 countries.
"Further drivers of the website's success can be found in both its own label and proportion of menswear sales. Own label continues to sit at around half of revenue, but gives ASOS an important differentiator, providing an entry level of fashionable, affordable garments which complement its more premium external brands. Menswear sales are driving much of the business' growth, jumping from 13% of sales in 2011 to 24% in 2012, as the retailer taps into the desire of male shoppers for a more efficient way of shopping.
"With margin and profit also growing, these are a well rounded set of results and it is no surprise that ASOS has recently been rumoured as a potential takeover target for Amazon. As the business continues to grow, new challenges will arise, but ASOS remains well placed to meet them.
Aurelie Caspar, Bank of America Merrill Lynch analyst:
We continue to believe that ASOS has structural advantages and that its long-term international potential is very large. In our view ASOS will easily achieve its "1-5-5" target and could then reach £2bn of sales by 2020. While most of the growth will come from international markets, we also believe the UK is not a mature market yet. We also recently took a deep dive into ASOS' margin structure and concluded that while margins have scope to increase slightly, profit growth will mainly come from topline growth going forward.
Bethany Hocking, analyst at Investec:
"In the first statement under the new August year-end regime ASOS has reported Q4 total sales up 31% to GBP145.2m. This is a tad above consensus of GBP144.6m. Encouragingly, UK Q4 sales were up 15% (vs. a soft comp), above expectations. Retail gross margin was up 70bps in Q4 and approximately 250bps in FY12 - the former in particular is a good result given the pricing cuts made. The company expects no change to FY12 PBT consensus of GBP43.4m...
"We assessed the impact of opening in-country warehouses, which we expect from FY16 onwards. We expect these to act as a turbo-boost to both earnings and cash flow. Nearer-term, we view ASOS's leading customer interaction and global reach as continuing to drive market share gains."
Malcolm Pinkerton, Senior Analyst at Planet Retail:
"International operations continue to be the engine of growth for ASOS. They have successfully capitalised on the increased online penetration of fashion retailing around the world by utilising their expertise in online retailing and skills in engaging with their core customer base. With its global platform launching in 2014, and the potential of the US, Australia, let alone China and Russia, yet to be fully realised, international growth for ASOS is showing no signs of slowing in the near term.
"Although robust, growth in the UK has become harder to achieve. ASOS is facing a challenging time, and will need to work hard to achieve growth with renewed efforts in marketing and engagement with its core customer base, so it is not over-reliant on international sales for growth."
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