Asos Beats Sales Forecasts

LONDON, United Kingdom — Asos beat analysts' expectations for sales growth over Christmas, indicating that management at the British online fashion retailer has addressed operational issues that plagued it in 2019, sending its shares sharply higher.

The stock was up 11 percent at 08.17am GMT on Thursday after Asos, which sells fashion aimed at 20-somethings, reported a 20 percent rise in retail sales to £1.075 billion ($1.41 billion) in the four months to December 31, topping analysts' expectations of growth of around 15 percent.

"It is still early in the year and much remains to be done, but we are encouraged by the progress we have made so far. We remain confident in our ability to capture the substantial opportunity ahead of us," Chief Executive Nick Beighton said.

Its gross margin fell 170 basis points, which Asos said reflected US duty and investments to attract customers which was planned and previously flagged.

Asos' performance implied a 2 percent upgrade to consensus revenue forecasts for the full 2019-20 year, analysts at RBC Europe said.

Asos is working through a major overhaul of its warehouse and technology capabilities, moving from a UK-focused to a global model to better access growth opportunities.

In a profit warning in July Asos highlighted problems ramping up warehouses in Atlanta in the United States and Berlin in Germany which restricted product availability, hitting sales and raising costs. In October it said these issues were largely behind it.

The Christmas outcome showed further progress.

The group reported a good performance across all regions for the four-month period, reflecting a record Black Friday and strong customer engagement activity. Total orders increased 20 percent to 27.7 million.

It said it was on track with its plans for the full 2019-20 year and its outlook was unchanged.

By James Davey; editors: Kate Holton and Jason Neely.