ASOS sees £1bn wiped off its value as investors worry about bill for improvements

By

Matt West

|

Online retailer ASOS saw £1billion wiped off its value this morning after it warned it had to increase spending on improving its ordering and delivery systems and revealed sales figures that disappointed the City.

The fashion phenomenon, popular with web-savvy twentysomethings, said that capital expenditure would increase this year from £55m to at least £68m as it steps up investment in warehousing in the UK and Germany and in IT in order to speed up deliveries and cut costs.

ASOS’s rapid growth in recent years has made it one of the London market’s best performing stocks, but its shares dived by 20 per cent at one stage today – even though the group said it remains on track to achieve annual sales of more than £1billion for the first time this year. They later recovered to stand 870p or 14 per cent down at 5,456p.

Expansion: ASOS warned sales margins would be impacted this year but its investment costs which include a new warehouse and set up costs in China

Its shares have soared in recent years,

rising from 255p at the start of 2008 to around 7,000p earlier this

year, giving it a value of more than £6billion.

Today’s warning also had a severe impact on

smaller rival Boohoo.com, whose shares slid 10 per cent just days after

joining the stock market in a move that delivered a big windfall for its

founding family.

The ASOS sales figures follow a string of spectacular stock market debuts by online retailers in recent weeks.

Online

electrical retailer Appliances Online saw its share price soar 33 per

cent on its first day of trading on the London Stock Exchange valuing

the firm at £1.6billion, nearly as much as rival Dixons, from an opening

value of £1.2billion on the day which already made £300million it

bigger than high street stalwart Debenhams.

And last week stock in Burnley based Boohoo.com

soared 50 per cent on

its first day of trading, netting its founders a gain of £125million in

a matter of minutes, and taking their total estimated wealth to

£600million. Boohoo’s value after its first full day on the stock

exchange was £850million.

Bubble: Online retailers have followed the example of ASOS in recent weeks and floated on the stock exchange in what some fear may be a new dotcom bubble

Retail sales at ASOS were 26 per cent higher

than a year ago at £136.7million in the two months to February 28, but

this was below City expectations for 32 per cent growth.

ASOS

said sales were strong in all territories except the Rest of World,

where it faces adverse currency movements, notably in Australia and

Russia.

However, Cantor

Fitzgerald analyst Freddie George said UK sales growth of 21 per cent to

£48.4 million was below his hopes for a rise of 30.6 per cent.

He downgraded his profit forecast for

the year to August by £5million to £64million after the company also

pointed to pressure on margins caused by its investment in new

warehousing as well as start-up costs in China.

Mr George added: ‘The company, we

believe will now focus on a limited number of markets with a view to

making them as significant as the UK rather than taking a scatter gun

approach to global expansion.’

ASOS’s

websites attract 71million visits per month while it had 8.2million

active customers in the last year, of which 3.2million were in the UK.

Nosedive: ASOS saw £1billion wiped off its value this morning after sales disappointed City expectations

More traditional retailers Pets at Home and Poundland have also both debuted on the stock market in the last week although neither has attracted the same level of interest from investors as Boohoo. and AO.com

Several more retailers are expected to float on the London market later this year with the latest believed to be upmarket shoe retailer Jimmy Choo.

The firm’s Swiss owner has held talks with investment banks about the possibility of a £1billion float of the business.

Labelux, which bought Jimmy Choo in 2011 for £525million, said that no final decision has been made. And China’s answer to Amazon, Alibaba Group, also announced plans to float in what could be the biggest listing ever seen in America.

Valued at £72billion, it would surpass Visa’s £10billion listing and fuel concerns about a dotcom bubble.

Figures from the British Retail Consortium earlier this month showed overall retail sales fell in February with the wet weather blamed for the first slump on the high street since last April.

Online retail sales however held up and now have a 17 per cent share of the retail market compared to 14 per cent a year ago.

Comments (2)

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SueCB,

Stuttgart, Germany,

moments ago

I’m one of the 8.2million customers. Love ASOS, one of the best websites. Wish the German websites would catch up!

takingiteasy,

haywards heath, United Kingdom,

31 minutes ago

The valuations of these companies remind me of the valuations before the first dot.com crash. There is a good reason why these companies suddenly all want to float, their investors want out before the values collapse.

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ASOS sees £1bn wiped off its value as investors worry about bill for improvements