Shares in online retailer Asos (ASC) took a beating last weak after the company revealed in a trading update that pre-tax profit for the full year would be slightly lower than expected, mainly due to higher investment in logistics and start-up costs in China. Sales growth also slowed in the second quarter.
This was a stark reminder that to justify its share-price premium - the stock trades on 89 times earnings forecasts for this year - Asos must consistently deliver flawless trading. Any hint of a slowdown, even if by just a few percentage points, and the shares get hammered. Retail-sales growth in the second quarter slowed to 26 per cent, a touch light of forecasts, while 21 per cent revenue growth in the UK was lower than expected.
The statement also gave a sneak preview of what is to come when Asos reports its interim results next week. UK retail sales were up 32 per cent to £182m for the period to 28 Feb, while international sales rose 35 per cent. Revenue in the 'rest of the world' division increased by 14 per cent to £116m, dampened slightly by the weaker Russian ruble and Australian dollar.
The costs associated with launching in China and expanding the logistics operation will be disproportionately borne in the first half too, which means the period will only provide 30 per cent of total pre-tax profit for the year.
