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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Marks & Spencer Group plc    MKS   GB0031274896

MARKS & SPENCER GROUP PLC

(MKS)
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ASOS blames warehouse ramp-ups for sales growth miss

07/12/2018 | 10:00am EST
FILE PHOTO - A model walks on an in-house catwalk at the ASOS headquarters in London

LONDON (Reuters) - British online fashion retailer ASOS missed analysts' forecasts for sales growth in its latest trading period, saying it had reined in marketing efforts as it focused on ramping up warehousing space in Germany and the United States.

Though the company said it would meet analysts' profit expectations for its 2017-18 financial year and sales growth estimates of 25-30 percent, albeit at the lower end of the range, its shares fell as much as 13.3 percent on Thursday.

Listed on London's junior AIM market, ASOS shares had risen 13 percent in the year to Wednesday's close, and the stock had been trading at 67 times forecast earnings, one of the highest multiples in the sector, giving little margin for error.

Its market capitalisation of 5.47 billion pounds ($7.23 billion) is 400 million pounds higher than that of retail stalwart Marks & Spencer.

ASOS, which sells fashion aimed at twentysomethings, said total retail sales rose 22 percent to 802.7 million pounds in the four months to June 30 - below analysts' average forecast for growth of 25.8 percent and the 27 percent growth it reported in the first half.

"As well as managing 22 percent growth we’re also managing demand around very key infrastructure programmes,” Chief Executive Nick Beighton told reporters.

In the next few weeks, ASOS will open a 1 million square feet warehouse in Atlanta in the United States, and in early September will open the second phase of its 800,000 square feet 'Eurohub' warehouse in Berlin.

“There’s certain quarters where you go for growth and certain quarters where you manage demand around your infrastructure periods – the last four months has been categorised by that,” said Beighton.

He declined to comment on the share price fall.

ONLINE SALES TAX?

ASOS' UK sales rose 23 percent and were up 21 percent in its overseas markets. The firm's retail gross margin rose 130 basis points, which it said was "ahead of plan".

Analysts at HSBC said the roll-out of new European data privacy laws, which impose new requirements on how companies collect and process personal information, was also a factor in holding back ASOS' sales growth. European Union General Data Protection Regulation (GDPR) went into effect on May 25.

ASOS said it expected a full year pretax profit in line with analysts' average forecast of 101 million pounds, up from 80 million in 2016-17.

"Performance is more about what ASOS has chosen not to do, rather than what it has done," said analysts at Peel Hunt, who have a "buy" rating on the stock.

"U.S. activity has all but stopped ahead of the new Atlanta warehouse coming on-stream and management has also dialled down on EU activity ahead of the automation of Eurohub 2 going live," they said.

Beighton said ASOS' trading since June 30 was going well, particularly full price sales, and he reiterated mid-term guidance for revenue growth of 20-25 percent and an operating margin of about 4 percent.

While ASOS and online peer Boohoo continue to report robust sales growth, Britain's traditional clothing retailers such as M&S, Debenhams and House of Fraser are closing stores.

This has prompted calls from traditional bricks and mortar retailers for a relaxation of business rates - property taxes for businesses - and for the imposition of an online sales tax to level the playing field.

"Business rates is a archaic structure that needs to be modernised from where we are now," said Beighton.

"That doesn't necessarily mean I support a tax online. In the UK we have tax for online sales called VAT (value added tax), the same as everybody else."

($1 = 0.7569 pounds)

(Editing by Jason Neely and Mark Potter)

By James Davey


© Reuters 2018
Stocks mentioned in the article
ChangeLast1st jan.
ASOS PLC -1.90% 4700 Delayed Quote.-1.74%
BOOHOO GROUP PLC -2.73% 334.5 Delayed Quote.-2.48%
HSBC HOLDINGS PLC -0.01% 400.15 Delayed Quote.5.62%
JASON CO., LTD. -0.61% 654 End-of-day quote.-2.10%
MARKS & SPENCER GROUP PLC 3.10% 148 Delayed Quote.8.58%
SPACE CO.,LTD. 0.13% 790 End-of-day quote.0.13%
SQUARE, INC. -3.21% 202.46 Delayed Quote.-6.97%
UNITED PARCEL SERVICE, INC. -2.34% 157.65 Delayed Quote.-6.38%
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Financials
Sales 2021 8 956 M 12 244 M 12 244 M
Net income 2021 27,6 M 37,7 M 37,7 M
Net Debt 2021 4 005 M 5 475 M 5 475 M
P/E ratio 2021 359x
Yield 2021 0,55%
Capitalization 2 893 M 3 965 M 3 955 M
EV / Sales 2021 0,77x
EV / Sales 2022 0,65x
Nbr of Employees 75 505
Free-Float 99,5%
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Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 147,35 GBX
Last Close Price 148,00 GBX
Spread / Highest target 21,6%
Spread / Average Target -0,44%
Spread / Lowest Target -18,9%
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Managers and Directors
NameTitle
Steve Rowe Chief Executive Officer & Executive Director
Archie J. Norman Chairman
Eoin Philip Tonge Chief Financial Officer & Director
Carl Dawson Director-Information Technology
Andrew Nigel Halford Senior Independent Non-Executive Director
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