No retail blues for ASOS after record Black Friday performance

With this solid set of figures, the effect of online disruption in the retail industry is becoming even more apparent

Article updated: 24 January 2020 12:00pm Author: Joe Healey

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• After a tetchy 2019 featuring two profit warnings, the online fashion retailer posted a soothing 20% increase in total group revenues this morning outperforming market expectations
• Robust growth across all regions was recognised across the four months to December reflecting strong customer engagement and a record Black Friday performance
• Active customers and website visits showed promise, both displaying robust growth maintaining positive momentum for the Group
• Shares have risen 10% in early trading in reaction to stellar results
• Recommendation: We currently do not have a view on this stock, but for investors who believe in the company’s long term strategy we would suggest seeing these shares as a ‘Hold’

After a tetchy 2019 featuring two profit warnings, online fashion retailer ASOS posted a soothing 20% increase in total group revenues this morning outperforming market expectations, which has seen the shares rise roughly 10% in early trading. Robust growth across all regions was recognised over the four months to December, reflecting strong customer engagement and a record Black Friday. Active customers and website visits showed promise, both displaying sturdy growth maintaining positive momentum for the Group. Gross margins fell by 1.7% due to ongoing investment. The Group’s outlook for FY 2020 remains unchanged.

These results go to show, yet again, the effect of online disruption in the retail industry. Following from Boohoo’s strong update last week, ASOS have followed suit with a solid set of figures this morning which sets them up nicely for the financial year. Actions taken to improve product choice and availability, presentation and social media engagement seem to have resonated well with its customer base and will be welcome news for investors.

The stage is now set for ASOS to build on this secure start and put a troubling 2019 behind them. Although they have a lot of work to do to return to their former glory, it seems the company is putting the building blocks in place to achieve this.

With a higher emphasis on longer-term prospects, an increased focus on retention and strong international growth, investors have a right to be optimistic looking forward. Although it may be too early to say, there is reason to believe that this may be a case of New Year New ASOS.

We currently do not have a view on this stock, but for investors who believe in the company’s long term strategy and are willing to look past its high valuation the stock may be appealing. However, for now taking this into account we would suggest a ‘Hold’.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

 

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.

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