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ASOS shares climb on thumbs-up from broker

Jefferies praised the company for creating a lasting brand in a competitive retail environment

Shares in online clothes retailer ASOS (LON:ASC) jumped today on the back of a positive write-up by US broker Jefferies.

Analyst David Reynolds kicked off coverage of the stock with a ‘buy’ rating and 2,199 pence target price and praised the company for creating a lasting brand in a competitive retail environment.

Shares lifted 93 pence or almost five per cent to 1,993 pence.

“Our thesis rests on three key ideas: ASOS is a dynamic disruptor in a surprisingly staid industry, the business model defines operational leverage and delivers strong RoIC [return on invested capital] and lastly, our proprietary brand analysis indicates real competitive advantage,” said the analyst.

ASOS has built a competitive UK brand that has cracked the staid, but fragmented fashion retail arena,” Reynolds added.

“Their share of influence is growing, more so among the key influencers; in fashion, that's gold dust.”

Although the brand is efficient and affordable, Reynolds thinks ASOS falls short on style.

He reckons it needs to take a look at the model put forward by tech giant Apple, which opened a limited number of flagship outlets and “redefined the retail experience”. This, he says, will help build the style element of the brand.

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