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Analyst response: Asos

Asos’ second quarter results released today were slightly above forecasts – but show a marginal slowing down on previous figures, analysts have said.

Several picked up on the impact on profit growth that the business’ sales momentum was having, noting that although revenues were higher than expected in the UK, margins were not.

Investment in expansion in China and Russia was also eating into overall margins, some said.

John Stevenson of Peel Hunt said he retained the view that Asos was “a compelling long-term growth story”, although advised that some profits be taken at this stage.

He noted that “material profit outperformance [is] likely after 2015 and not before”.

Espirito Santo’s Sanjay Vidyarthi said it was the “same story as in Q1 – strong sales offset by weaker gross margins”. Retail gross margins were down 50 basis points.

He added: “The share price, in our view, is being driven by sales upgrades, rather than profit outperformance.”

Panmure Gordon analyst Jean Roche noted that after a strong December, “January and February were clearly slower months, but not by much”.

She said the 50bps drop in margins was “mainly due to the Asos own-brand re-pricing exercise, which will annualise fully in May”.

Independent analyst Nick Bubb agreed there had been “a slight slowdown from the amazing figures reported by Asos for December”, but added that today’s figures are still “better than the c34% the market was expecting”.

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