Is ASOS back in fashion?

• Despite disappointing results, the online fashion retailer’s shares responded positively as the group is gradually getting back into a better position
• Though sales rose 15% in UK, the group showed a 68% drop in pre-tax profits
• The Share Centre has no formal recommendation on the shares but in this sector we prefer Boohoo due to its strong and consistent growth

Online fashion retailer ASOS has had a fairly dismal year but there were some tentative signs today that things may be looking slightly better. The company announced new management roles designed to boost its flagging growth and reported full-year results which were largely in line with guidance given in July. They showed a 68% drop in pre-tax profits due to a number of operational issues, although revenue rose 12% to £2.7bn on a constant currency basis, which was better than expected.

Sales in the UK rose 15%, though more than 60% of its revenue comes from overseas. It was notable the company did not offer any forecasts for the new financial year and said a lot of work remained to get the business back on track.

The market responded positively to the news with the shares up 16% in early trading. Much of that is recovering from a sharp drop over the past six months but may also be due to the new management changes and the fact the company is gradually getting back into a better position. While all of that is positive for investors, the company clearly has some way to go to recover trust given the profit warning earlier in the year, and its markets are getting ever more competitive. We do not have a recommendation on the shares but in this sector we prefer Boohoo due to its strong and consistent growth.