Beware weight of expectation
BEWARE the weight of great expectations. It is hard to quibble with the performance of Asos, which grew annual profits by 41 per cent in the year to 31 March; few other consumer-facing businesses can match that in these tough times.
Strategically, the firm is making great strides. It has grown the number of its product lines from 36,000 to 50,000 and launched three country specific websites in the US, France and Germany (this year it will launch in Australia, Spain and Italy).
Its development of “Facebook stores” that tap into social networks, as well as its mobile-phone applications, has been inspired. Visitors to its website – which is now one of the top five most-visited fashion sites in the world – are up 176 per cent; orders have grown 315 per cent.
But the ratings for Asos shares have always been ridiculously sky-high, largely because as an internet retailer the firm attracts the kind of hype that is usually reserved for tech stocks.
Even after yesterday’s sell off, which saw the stock shed 8.3 per cent, the firm’s market cap of £1.6bn is almost five times sales.
We like the business but that multiple is too rich for us. Nice business – shame about the share price.