Online fashion flogger ASOS, the flag carrier for London’s Alternative Investment Market, issues full-year figures on Tuesday.
UBS recently upped its price target for the shares from 4,450p to 5,500p, saying the investment case is “evolving into online fast fashion and away from pure brand aggregation, albeit with a degree of edited range and product selection”.
The market is expecting ASOS to announce pre-tax profits of £62.2mln on sales of £1.44bn. Shore Capital is a little more optimistic than that, going for pre-tax profit of £63.1mln, after re-evaluating its expectations over the last two months of the retailer’s financial year.
What’s changed? Well, sterling has taken a bath for one thing, which should prove a boon to the British company.
“On a reported basis we expect to see an acceleration in sales in the US and EU, with currency tailwinds supporting top-line momentum. We have been bullish about the prospects of the business in the former; we view the online fast fashion market in the US as underdeveloped compared with the domestic UK market, thus representing an opportunity for those businesses with a compelling proposition such as ASOS and Boohoo,” the broker said.
Peel Hunt’s forecast is for sales growth of 25.4% to £1.4bn, generating underlying profit before tax of £62.1mln,which would be up 50.5% year-on-year.
“ASOS is very clearly on the front foot. While ASOS is 80% hedged for its currency needs, the business is passing on the remaining currency benefit to drive the US business, one of the few beneficiaries of the recent currency volatility,” Peel Hunt said.
The broker expects the key performance indicators and customer engagement levels to have improved, reflecting investment by the company on its online offering.
“With top-line outperformance largely invested, there may be modest upside pressure on forecasts, but major upgrades are unlikely,” the broker predicted.
Sector peer Burberry reports the same day as ASOS, with Deutsche Bank expecting the company to report like-for-like growth in retail sales for the first time in more than a year.
“Growth may be held back by some recent price cuts, but … these have established a quite healthy global price architecture. Burberry profits should enjoy strong currency tailwinds in FY Mar-17, and we estimate these are now £120mln at spot rates (vs £90mln guidance),” the broker said.
Significant announcements expected
Finals: ASOS PLC (LON:ASC), Bellway PLC (LON:BWY), Connect Group PLC (LON:CNCT), dotDigital Group (LON:DOTD)
Trading statement: Burberry Group PLC (LON:BRBY), Informa PLC (LON:INF)