Macquarie starts coverage of ASOS at 'outperform'

“ASOS is an attractive online fashion mall/destination for the 16-34 year old global audience, offering a range of own-label and branded products with best-in-class delivery/return options in the UK. It is a key structural winner in our space providing superior growth and return on capital employed.”

Macquarie said the company was well positioned in its proprietary fashion retail framework as a result of clearly distinctive positioning, strategic flexibility and differentiating supply chain.

It pointed to strong product differentiation, attractive prices, with the biggest differentiation coming from its focus on a well-defined target group of people in their 20s. The content-rich presentation with intuitive mobile navigation drives engagement and loyalty, it said.

In addition, it argued that recent significant catch-up investments in technology, strength in mobile, smart use of data and expansion of its best-in-class UK fulfilment capabilities in Europe/US should enable the company to exploit significant growth potential.

“We expect ASOS to continue to improve its proposition by investing benefits from scale and improving UK warehouse efficiency among others into more attractive prices, shorter deliveries and improved delivery/return options. This is particularly true for high-potential European and US markets.”

As a result, Macquarie expects the retailer’s global online fashion market share to rise to 1.2% by 2020 from 0.9%.

At 0945 BST, the shares were up 2.8% to 4,748p.