Morningstar | ASOS' Sales Affected by Delivery Disruptions in U.S., Europe Remains Weak; FVE Maintained
We are maintaining our fair value estimate of GBX 3,480 per share for no-moat ASOS as the company reported 11% constant-currency revenue growth in the second quarter ended Feb. 28. This brings constant-currency growth for the first six months of the fiscal year to 12% and total growth at actual currencies to 14% (versus the 14.7% annual revenue growth we expect). The company kept its guidance for around 15% revenue growth, gross margin shrinkage of 150 basis points, and EBIT margin of 2%.Results were affected by disruptions in the U.S. market, where demand far exceeded expectations, resulting in a significant backlog and a sales decline of 3% in the second quarter. The backlog has now been cleared and the company expects stronger performance going forward. Growth in the United Kingdom decelerated to 14% in the second quarter from 19% in the first quarter, while European sales growth remained muted at 8% (versus 14% in the first quarter). Management is planning higher investments in pricing and customer proposition in this region in the second half. The rest of the world segment, with notable contributions from Russia and Australia, which contribute 40% of this segment’s sales, recovered from a decline of 2% in the first quarter to 21% constant-currency growth.
We expect to get more details on underlying performance when the company reports interim results April 10.
ASOS and its subsidiaries (together, the Group) is a global fashion retailer. The Group sells products across the world and has websites targeting the U.K., U.S., Australia, France, Germany, Spain, Italy and Russia. Co. creates and curates fashion, face + body products for every fashion-loving 20-something.
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