Asos tumbles despite strong start to year

Sales accelerated in the first four months of Asos's new financial year, in line with forecasts, with the online fashion retailer's UK and international arms contributing well and profit margins only slightly squeezed.

Group sales of £446.9m in the four months to 31 December were up 22% on the same period a year before, or 27% higher at constant currency rates. This was a marked improvement from the 17% growth in the last full year.

UK retail sales grew 25% to £206.2m, which was slightly down from the 27% in the full year, though powerful growth in Europe and the US lifted international sales 20% to £240.7m, or up 28% at constant currencies.

The e-tailer seems to have transitioned seamlessly after founder chief executive Nick Robertson stood down in September and was replaced by chief operating officer Nick Beighton.

Beighton said the 40-basis-point squeeze on retail gross margin was due to the continued investment in cutting prices and further deployment of the zonal pricing tool in international markets, as well as continued strong full price sales mix.

Some of the price investment helped Asos enjoy record sales over cyber weekend in late November, but Beighton also highlighted further growth in average order frequency, average basket value and number of orders, alongside an acceleration in active customer growth, up 18% to 10.7m.

"We have traded well through peak and are continuing to invest in the future growth of the business. We are on track with our plans for the year as a whole," he said.

Investments are continuing in warehousing and technology and in December construction began on the second 'EuroHub' facility on the continent, which is expected to be commissioned in 2017.

Analysts at Numis were impressed. "In our view this was an exceptional performance, particularly given the continuation of the shift in stance towards full price, the unfavourable weather, and net currency headwinds."

Shore Capital said the performance was in line with market expectations, which it felt was unsurprising with the company's strong offering in both menswear and womenswear.

"The consistency and increasing convenience of its proposition means strong trading likely continued in the run up to Christmas too. We feel its offering in mobile is particularly a key factor within this performance, with mobile representing 65% of traffic. We also note a triple digit increase in visits to the ASOS mobile app."

Shares in the company fell more than 6% in early trade, however, before climbing to 3,101p by 1005 GMT, a fall of 2.5%.