Shares digital

by John Marshall

Online fashion retailer ASOS has again underlined its ability to shine amid the retail gloom after unveiling another incredible hike in top line growth. The London-based firm saw sales soar 90% in the 12 months to the end of March, while the trend has continued since then also, up another 80% in the last four weeks.

This is a staggering performance when drawn against the beleaguered trading backcloth experienced by many retailing companies. It also implies that the company will post pre-tax profits of around £6.9 million for the year to March, after factoring in £1.1 million of one-off costs, a stunning 38% higher than the £5 million or so analysts had originally forecast.

Such a stellar trading performance speaks volumes about the retailer’s savvy online fashion strategy. Investment continues to be ploughed into the company’s website, while ASOS is also striking an increasing number of deals to sell third-party branded products, including French Connection and Kookai.

This will also bolster confidence in the company’s ability to hit taxable profits of around £12 million to £13 million in the current year, which runs from the start of April through to the end of March 2009.

Analysts at stock broker Numis remain among the more optimistic, believing that pre-tax profits could go as high as £13.3 million this year, implying earnings of around 24p a share.

House broker Seymour Pierce remains a little more cautious with a current full-year profits estimate of £12 million pencilled in, although there is a very good chance of this figure being adjusted upwards over the coming weeks and months. Share price targets for the stock are currently pitched at around the 390p to 400p level, roughly a third higher than the 300p at which they currently change hands.

Shareholders will also be encouraged by talk of dividends. ASOS has remained off the dividend list so far due to the hefty financial commitment to fuel the firm’s growth strategy, but chief executive Nick Robertson admits that talks are now taking place at board level about dividends, although a maiden payout looks unlikely until next year at the earliest.

Shares says: Niche retailer should continue to perform well, albeit at a less dramatic rate in future.

The writer holds shares in this company