Jun 9, 2010
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ASOS invests for growth as sales soar

Jun 9, 2010

By James Davey

LONDON, June 9 (Reuters) - British online fashion retailer ASOS (ASOS.L) plans to invest 40 million pounds ($58 million) to boost its logistical capacity, it said on Wednesday 9 June, with a view to becoming a 1 billion-pound business within five years.

Photo: www.asos.com

The fast-growing firm said on Wednesday 9 June it had signed a lease on a 1.2 million square-foot "mega shed" in Barnsley, northern England, as it posted an expected 44 percent rise in year profits, reported buoyant current trading and forecast another year of growth both in the UK and internationally.

"This warehouse marks a step-change in ASOS's development, being sufficient to take the business to its five-year target of 1 billion pounds of sales," said Andrew Wade, analyst at Numis Securities, who raised his pretax profit forecast for 2010-11 by 2.5 percent to 25.8 million pounds.

Shares in ASOS, which have risen 39 percent over the last quarter, were up 5.6 percent at 667.5 pence at 0814 GMT, valuing the business at 499 million pounds.

While many retailers have struggled, ASOS has defied the recession, benefiting from a young core customer base and the migration of spending from the high street to the Internet.

ASOS targets Internet-savvy 18-34 year olds looking to emulate the designer looks of celebrities like Kate Moss, Sienna Miller and Alexa Chung but at a fraction of the price.

It said recent trade has been stoked by robust demand for maxi-dresses and skirts, shorts, Wellington boots, sunglasses and clogs for the summer music festival season.

The firm plans to launch a U.S. website in September and sites for France and Germany will follow later in the year.

The new warehouse, which will replace an existing operation in Hemel Hempstead, north of London, will have initial capacity for 600 million pounds of annual sales after an investment of 20 million pounds this year. It will be fully operational by mid 2011, the company said.

Chief Executive Nick Robertson told Reuters its capacity will increase to over 1 billion pounds of annual sales with another 19 million pounds of investment in 2011-13.

ASOS will fund the investment from operating cashflow and additional short-term facilities.

It made a pretax profit of 20.3 million pounds in the year to March 31 -- bang in line with analysts' consensus forecast, according to Thomson Reuters I/B/E/S, and up from 14.1 million pounds made in 2008-09.

Sales increased 35 percent to 223 million pounds and are up 58 percent in the nine weeks to June 6, with UK sales up 36 percent and international sales soaring 118 percent.

"It's hard to say whether or not it (this rate of growth) would be sustainable for the (first half) period but let's say we are more confident this year than we were last year," said Robertson, who owns 13 percent of ASOS's equity.

Separately on Tuesday 8 June, Europe's biggest clothing retailer Inditex (ITX.MC) posted forecast-beating first quarter profit and said it would start long-awaited Internet sales for its Zara chain on Sept. 2.[ID:nLDE65803K] ($1=.6465 pounds) (Editing by Greg Mahlich)

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