Can ASOS avoid another fashion faux-pas with next Thursday’s trading update?
The online juggernaut’s market performance has stalled somewhat in 2018. By mid-March the stock had managed to grunt its way to a fresh all-time high of £77.57, a climb that saw it finally re-reach, and go beyond, the £70 peak it had last struck in 2014.
Yet from such heights there is perhaps only one way to go. In the weeks that followed that high ASOS took a tumble, made worse by the reaction to its interim results in April, with the stock eventually hitting a 5 month low of £57.83 at the start of May.
From there ASOS managed to rally back towards £69 by mid-June, only to stumble once more on the news that the US Supreme Court had overturned a ruling allowing the company to avoid sales taxes on its products. ASOS (LON:ASOS) now sits at a current trading price of £62.53.
As for those aforementioned half year results, investors’ main issue was the size of the firm’s spending, with ASOS announcing it would splash £230 million to £250 million this year and the next as it invests in its technology and warehousing infrastructure. The figures themselves, however, were strong: group revenues surged 27% to £1.16 billion, with a 22% rise in UK retail sales and a 31% increase internationally. Pre-tax profit, meanwhile, was up 10% to £29.9 million, as the gross margin jumped from 48.3% to 49.2%.
In terms of next Thursday’s statement, which covers the 4 months ending 30th June 2018, investors are going to want to see the usual double-digit revenue growth, alongside a further improvement in margins. They may also be after a comment on the Supreme Court tax decision, given that Morgan Stanley (NYSE:MS) said it could lop off 5 percentage points from its US gross profit margin.
ASOS has a consensus rating of ‘Buy’ alongside an average target price of £73.19.
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