Asos to quit AIM, festive trading mixed

(Sharecast News) - Asos said on Thursday that it will move to the London Stock Exchange's main list, as it reported a strengthened sales performance despite "challenging" market conditions.
Updating on trading for the core festive season, the online retailer said total group revenues in the four months to 31 December were £1.39bn, a 2% improvement on the same period a year earlier, or a 5% rise on a constant currency basis.

Within that, sales in the UK - Asos's biggest market - rose 13% to £645.2m.

UK sales were ahead of consensus. But analysts had been expecting group sales growth of around 6% on a constant currency basis, while gross margin decreased by 400 basis points to 43.0%, driven by increased discounting and higher freight costs.

Asos said: "Supply chain constraints played out as anticipated, while market demand remained volatile due to significantly increased Covid caseloads across large parts of the UK, Europe and the US."

The company left its guidance for the full year unchanged, however. Revenue growth is forecast to be between 10% and 15%, while adjusted pre-tax profits are expected to come in between £110m and £140m.

Asos also announced it would move to the main market in February after 20 years on AIM. Explaining the decision, it said: "The directors consider that admission would further enhance the company's corporate profile and recognition, as well as extending the opportunity to own the company's ordinary shares to a broader group of global institutional shareholders." Asos is one of AIM's biggest companies.

As at 1130 GMT, shares in the retailer were ahead 11% at 2,505.0p.

Mat Dunn, chief operating officer, said: "Asos has delivered a robust start to the year, in line with the guidance we set out at the full-year results, despite challenging market conditions. We continue to make progress against our objectives to improve the flexibility and speed of our retail mode, and accelerate the pace of delivery of our international growth strategy.

"Looking ahead, while mindful of the near-term uncertainty relating to the pandemic, our guidance for the full year remains unchanged."

Asos also announced on Thursday that it had appointed Bank of Ireland chair Patrick Kennedy senior independent non-executive director and audit committee chair.

Eleonora Dani, analyst at Shore Capital, said: "This is an encouraging statement, but comes with low expectations. The business is still looking for its next chief executive, who is expected to join and embrace the strategy presented to the markets in November. Until then, it is challenging to have confidence in how the company navigates the current environment."

Russ Mould, investment director at AJ Bell, said: "The company should qualify for a place in the FTSE 250 index, and benefit from index funds buying its stock.

"AIM has historically been a place for young growth companies; once they start to become much bigger businesses, it is only natural to shift listings to the main market, the domain of longer-established companies and business that have successfully disrupted a market and are now generating decent profits. Asos certainly fits in the latter category [and] should have made the move years ago."