Shares in Asos plc (LON:ASC) fashioned lower today after Credit Suisse downgraded the retailer to an ‘underperform’ rating from ‘neutral’, citing high distribution and warehouse costs.
Shares fell 2.16% to 5,576.84p in morning trading.
The online clothing retailer on Tuesday raised its full year sales growth expectations following strong half-year results.
Profit before tax for the six months ended 28 February 2017 rose 14% to £27.3mln and revenue jumped 37% to £912mln, buoyed by international sales.
However, the group reported a 44% increase in distribution costs and a 41% rise in warehouse expenses.
“With distribution and warehouse costs 90 basis points (bps) higher in the period first half results have shown again how hard it is to achieve leverage in fulfilment costs at ASOS given the global distribution model and the need to keep investing in additional warehouse capacity and delivery proposition,” Credit Suisse said.
Credit Suisse has increased its full year revenue forecast by 2.5% and left its pre-tax profit estimate largely unchanged at £79.6mln but has cut its operating margin estimate by 10bps to 4.1% due to higher costs in fulfilment and sourcing.
The broker raised its target price to 5,300p from 5,100p.