Asos Surges as Online Clothing Retailer Beats Summer Heat

(Bloomberg) -- Asos Plc posted stronger-than-estimated pretax profit as Britain’s largest online-only fashion retailer posted double-digit sales growth while some of its rivals in retail struggle with volatile weather and digital-first competition. The shares rose as much as 12 percent in London, the most in more than three years.

Key Insights

  • Retailers like Asos that produce and sell their own labels continue to beat out rivals dependent on other companies. Unpredictable weather earlier this year caused the likes of Zalando SE to struggle. Companies that market their own brands can switch merchandise more quickly when snow gives way to sunshine.
  • The company has lost its currency advantage. Asos had benefited from a weak pound since the Brexit vote as it increased sourcing in the U.K. and expanded sales abroad. With sterling showing signs of life against the dollar and euro, that benefit has eroded.
  • While Zalando is finding it harder to boost sales, Asos has managed to balance growth and profitability. The company reiterated its medium-term sales-growth guidance at about 20 percent to 25 percent per year.

Market Reaction

Through Tuesday, the shares had fallen 26 percent this year. Wednesday’s bounce brings them back to levels at which they were trading earlier this month.

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