13th Jan 2015 09:09
LONDON (Alliance News) - Online fashion retailer ASOS PLC saw its shares rise Tuesday after it said sales growth accelerated over the key Christmas trading period, reporting a 15% rise in retail sales for the six-week period as UK sales held up strongly.
However, as previously guided, the retailer said its retail gross margin continues to take a hit from price investments, down around 200 basis points on the prior year.
In a statement, AIM-listed ASOS said total retail sales in the six weeks ended January 9 were up 15% on the corresponding period last year, without giving specific figures. UK sales rose 27%, while international sales were up only 5%.
The figures suggest that sales growth accelerated in the six-week period, after ASOS revealed last month that total retail sales grew by 8% for the three months to end-November, driven by a 24% increase in UK retail sales but offset by a 2% decline in international sales.
Chief Executive Nick Robertson said that trading in the last six week Christmas period was in line with expectations, and explained the fall in retail gross margin.
The retailer's trading update helped push ASOS shares up 6.7% to 2,591.00 pence Tuesday morning - the best-performing stock on London's AIM index.
"UK sales remained strong. Improved international sales...indicates an initial encouraging response to our planned price investments, also reflected in the retail gross margin performance which is in line with expectations for the period," Robertson said in a statement.
"Our roll out of zonal pricing continues to be on track. Our programme of investment in our IT platform and our distribution capability are also progressing well," the CEO added.
Outside of the UK, international trading conditions remained challenging for the group. The retailer had previously been seeing its higher-margin overseas markets outperforming the UK, with international sales making up more than half of its total sales in previous years. However that figure has begun to reverse, with UK trading outperforming over the last few quarters, as the strong pound continues to provide a headwind for the retailer, pushing up the price of its goods overseas.
To help combat slower sales growth abroad, ASOS started investing in its international pricing towards the end of last year, with different zonal pricing in countries like the UK, France and Australia.
ASOS said its guidance for both sales and earnings before interest and taxes margin remains unchanged.
Last month, ASOS said it was on track for full year total retail sales growth of 15% to 20% this year, with around 4% in [earnings before interest and taxes] margin. Robertson told Alliance News in an interview at the time that investments in its international pricing was taking a couple of percentage points off its EBIT margin, having lowered its guidance to 4% from 6%.
In contrast, online fashion retail rival Boohoo.com PLC issued a profit warning last Wednesday, sending its share tumbling to an all-time low. Boohoo warned its full-year results will be below market expectations as sales growth over the last four months to end-December fell short of its forecasts, because unusually warm autumn weather in the UK forced clothing retailers to discount heavily.
Analysts downgraded their profit expectations for Boohoo.com after the warning, now expecting a pretax profit of GBP12.4 million for the current financial year, according to a consensus of five analysts on Morningstar. Prior to the retailer profit warning, those analysts were guiding for a GBP17 million profit.
ASOS said it will release a trading update covering the three months to February 28 on March 12.
By Samuel Agini and Rowena Harris-Doughty; [email protected]; @samuelagini; [email protected]; @rharrisdoughty
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