Asos sees market value fuelled after strong fiscal Q4

ANALYSIS_ Pre/tax profit for the year ended Aug. 31 will be “marginally” above analyst estimates, as Asos advanced in a statement Thursday. On the back of the news, the stock jumped as much as 11 percent - the most in a year, and has almost

doubled in value in 2013.

Revenues at Asos for the full year are now expected to come at 769 million pounds, that's 39 percent above of last year's revenues. As pinpointed by the fashion e-tailer's chief executive, Nick Robertson, the UK alone accounts for 276 million pounds. Retail sales advanced 47 percent in the fourth quarter, beating estimates, and its customer base also grew, adding 42 percent year-on-year.

Analysts at UBS said Asos was on to a “winning formula” and that “the Asos strategy to continuously improve the customer offer across geographies is paramount for sustainable market share gain and sales growth.”

Prior to the update, analysts polled by Reuters were forecasting a consensus pre-tax profit for the 2012-13 year of almost 53 million pounds, 44.5 million pounds above its previous year's.

On a separate note, Deutsche Bank is predicting a 33 percent rise in full year pre-tax profits to 53 million pounds.

Shares in Asos rose 360 pence to 51.93 pounds in early trading Wednesday, after the online fashion company said the performance in the last three months means will take profits for the year "above expectations". After Asos updated its gains guidance, shares at the company, listed in the small and medium cap market in London, Aim, rose as much as 11 percent or 522 pence to 5,355 pence.

This strong kick off the session almost made up for the decline the stock noted over the previous two days after Morgan Stanley lowered its recommendation on Asos to ‘underweight’, highlighted Bloomberg.

"People were writing us off in the UK. Last year we took decisive action and it has paid dividends," said Asos top executive when commenting the results Wednesday.

Asos set “for a number of years of rapid growth”

“Asos is set for a number of years of rapid growth as a world leading online retailer,” Richard Edwards from Citigroup Inc. said in a note today. The company “combines a leading fast-fashion concept, a best-in-class online customer fulfilment proposition, in-house content creation and digital monitoring platform on an increasingly global basis.”

As broadly stressed by analysts, Asos is benefiting from a stronger appetite for online fashion both in the UK and foreign markets. In the US, summer sales rose 59 percent, while sales within Europe for the period improved by 73 percent. Other markets, including Australia, noted a humbler yet significant increase of 26 percent.

Sales in the UK saw 49 percent growth for the quarter ended on August 31, boosting the full-year growth to 34 percent. Fourth-quarter retail sales added 47 percent to 207.9 million pounds, way ahead the median estimate of 13 analysts compiled by Bloomberg for a 43 percent increase.

Wayne Brown, analyst at Canaccord Genuity, commented the news for ‘The Telegraph’ pointing "that the ability to adopt a 'disruptive pricing model' sourced from multiple drivers, the key element being volume, is delivering significant opportunity.”

With regards to the near future, Brown advanced that "In the next 12 months this will not only come from further price investment but the ability to enter into new markets and invest greater depth in core. International growth continues to be driven by the countries in which there are dedicated websites and in-country teams, and was particularly strong in Europe, driven by France, Germany, Italy and Spain. Strong growth in the US and in Russia, following the launch of the Russian website will continue to underpin International growth," the analyst summarised.

At current stock price, the company is worth 4.3 billion pounds. It's worth remembering that it doubled its share price in the last year.