Analysts have described Asos results as “disappointing”

Analysts have described Asos results as “disappointing”

Analysts have voiced their disappointment at the latest Asos trading update, which saw the online fashion retailer lower its full-year profit forecast.

Shares fell 14% in early morning trading as the group revealed retail sales growth of 15% to GBP240m (US$388.2m) in the three months to the end of August.

Retail gross margin, however, was down around 640 basis points on the prior year, and management said it now expects full-year pre-tax profits to be "similar" to the year recently ended.

Bernstein analysts Jamie Merriman and Rupert Galway-Cooper described the results as "disappointing", given further delays in zonal pricing and new guidance for margins over the coming years.

"Management has suggested they remain focused on long-term growth and are determined not to give competition an opportunity to undercut their position. While we believe the customer experience and response to ASOS remains strong in most markets, we expect investors' patience will be tested by these plans."

In order to rebuild investor confidence, Bernstein believes Asos will need to implement zonal pricing, demonstrate subsequent volume improvement, and stop reducing margin guidance.

Maureen Hinton, global research director at Conlumino pointed to the increasing competition Asos faces globally.

"With total retail sales just short of GBP1bn, Asos is a substantial business that has thrived on its innovation in the channel, but as the online channel matures globally it faces much tougher competition, not just from pure plays such as Zalando, but also from international fashion retailers such as H&M and Inditex who are expanding their online businesses.

"Germany, Zalando's core market, has been successful for Asos despite this, primarily because it targets a younger customer and has a different offer, but it has to remain vigilant as competition intensifies. Its target is to become a GBP2.5bn business, but its estimate of around six years to achieve this is realistic."

Asos' share price was down 7.16% to 2,248 pence at 13:09 GMT today (16 September).