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ASOS posts “better than expected” sales driven by Black Friday

The online fashion retailer added “there is still much work to be done” to make the most of this “encouraging” start of the financial year

ASOS PLC - ASOS “better than expected” sales driven by Black Friday

ASOS PLC (LON:ASC) said the Black Friday weekend drove “better than expected” sales in the first four months of the year but left guidance unchanged.

In the period to 31 December, total group revenue jumped 20% to £1.1bn compared to the same period in 2018.

READ: ASOS cut to ‘underweight’ as Morgan Stanley says medium-term forecasts “much too high”

The online fashion retailer added “there is still much work to be done” to make the most of this “encouraging” start of the financial year.

UK retail sales rose 18% to £409mln and international were up 22% to £666mln, pushing total retail sales up 20% to £1bn.

Gross margin, however, was 1.7% lower due to planned investment to attract customers and US tax.

“The focus for this year is to further enhance our capabilities and leverage the investments we have made,” said chief executive Nick Beighton in a release.

Recovery may be longer than expected

The AIM-listed firm is benefiting from the investment made throughout 2019 to recover from the disastrous performance of last winter when relentless sales growth caught up with the retailer.

In October, it posted a 68% plunge in profit before tax to £33mln after severe disruption at its new US and European warehouses.

A lack of guidance in terms of recovery and margins left the City confused ever since.

“Questions remain over whether the group can deliver an improvement in the underlying gross margin, considering the more promotional stance ASOS has taken to acquire customers and the competitive landscape,” analysts at Liberum said in a note.

“The removal of the detailed guidance, reduced disclosure around regional gross margins and break-out of operating expenses… suggest it is unlikely the company will return to the historically high growth rates anytime soon,” they added.

Other analysts expressed cautious optimism.

“ASOS has certainly impressed with this update, but the market consensus of the shares as a hold is likely to remain in place until the company can show that this performance represents a new trend, rather than a blip,” Richard Hunter from Interactive Investor said in an email.

Shares jumped 8% to 3,279.13p on Thursday morning.

-Adds analysts' comment, shares--

Quick facts: ASOS PLC

Price: 3142 GBX

AIM:ASC
Market: AIM
Market Cap: £2.64 billion
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