Asos First-Quarter Sales Beat Estimates on U.K. Price Cuts

Asos Plc, the U.K.’s largest online-only fashion retailer, reported first-quarter sales that beat analysts’ estimates as it lowered prices of its own-brand label and forecast a “good” Christmas season.

The stock surged as much as 7.6 percent to the highest level since the company’s initial public offering in 2001. Retail sales climbed 30 percent to 165.8 million pounds ($267 million) in the three months ended Nov. 30, the London-based retailer said. That was more than the 29 percent average of nine analysts’ estimates compiled by Bloomberg.

Asos, with over 60,000 product lines targeting people in their twenties, is overcoming the slowdown in consumer spending by offering budget-price clothing to fashion-conscious women. The retailer has cut the price of its Asos-label products and is investing in marketing and adding staff and offices in its bigger overseas markets including the U.S, France and Germany to lure shoppers.

The sales performance “sees the year off to a flying start,” Bethany Hocking, an analyst at Investec, said in an e-mail. She has a buy recommendation on the stock. The U.K. outperformance “should go some way to silence maturity arguments.”

U.K. sales rose 24 percent, better than the average estimate of a 16 percent gain, while international sales rose 34 percent.

Good Christmas

The stock traded 4.7 percent higher at 2,579 pence as of 11:40 a.m., having more than doubled this year.

“We’re in for a good one” this Christmas, Chief Executive Officer Nick Robertson said in a phone interview. “Every year is a bigger online year. People thought that would slow, I don’t think it will.”

New ways to buy online with tablet computers and mobile phones will fuel growth, he said.

“For online this Christmas, it’s going to be phenomenal,” the CEO added. “I’m very confident.”

The gross margin fell 1 percentage point, due to growth in U.K. sales where it sells fewer of its more profitable own-brand ranges, and a reduction in prices.

U.K. growth was driven by offering lower prices and “marketing a bit harder,” including on social media sites and with daily fashion updates on mobile phone applications, the executive said.

The “new norm is headline price-grabbing initiatives,” Robertson said of the U.K retail market. “We are headlining promotions, discounts to drive traffic but the result on the margin line is insignificant.”

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