Shares in online retailer ASOS plc (LON: ASC) (LSE: ASC.L) have surged 4% higher today following the release of a trading statement which covers the four months to 30 June. It shows that retail sales have risen by 30% following strong growth from ASOS’s international operations.
Notably, US retail sales rose by 53% and to put this into some kind of perspective, Wal-Mart Stores, Inc. (NYSE: WMT) recorded 4% sales growth in Q1. Further, ASOS’s EU retail sales increased by 32%, which means that international retail sales make up 59% of total sales, which is in-line with last year’s figure.
Retail gross margins have fallen by 180 basis points versus the prior year. This is due to sale phasing and planned price investment. ASOS continues to have a sound balance sheet and has 12 million active customers as at 30 June. In line with previous guidance, ASOS.cn ceased trading on 5 May, with operating losses and closure costs being as expected.
The performance of ASOS in the UK was relatively strong. Retail sales increased by 30% and were underpinned by the company’s continued price and proposition investments. ASOS now expects full-year sales growth to be at the upper end of the 20%-25% range. ASOS has maintained its retail gross margin guidance of up to 50 basis points of investment, with the company confident of delivering its full-year PBT numbers.
Since the start of the year, shares in ASOS have risen by 31% at a time when a number of UK-quoted retailers have experienced share price falls. For example, Debenhams Plc (LON: DEB) (LSE: DEB.L) is down by 22% since the turn of the year, while Next plc (LON: NXT) (LSE: NXT.L) has slumped by 28%. ASOS is even ahead of Wal-Mart in 2016, despite the latter’s 20% year-to-date gains.
This outperformance is largely due to Debenhams and Next’s UK exposure in a post-Brexit world, with ASOS’s international operations likely to help it to overcome any weakness in the UK economy. I still feel it is overvalued on a P/E of 78, but the company continues to perform relatively well.
The author does not own shares in ASOS, Debenhams, Next or Wal-Mart at the time of writing.