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ASOS says potential 'huge' as annual profit jumps 28 percent

ASOS says potential 'huge' as annual profit jumps 28 percent
FILE PHOTO: A model walks on an in-house catwalk at the ASOS headquarters in London April 1, 2014. REUTERS/Suzanne Plunkett   -   Copyright  Suzanne Plunkett(Reuters)
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By James Davey

LONDON (Reuters) – British online fashion retailer ASOS said its potential was “huge” as it narrowly beat forecasts with a 28 percent jump in 2017-18 profit and maintained guidance for its new financial year and beyond.

Listed on London’s junior AIM market, ASOS shares have fallen 26 percent this year. They fell sharply in July after the firm missed analysts’ forecasts for third quarter sales growth. ASOS said it had reined in marketing as it focused on ramping up warehouse space in Germany and the United States.

But on Wednesday the firm, which sells fashion aimed at twentysomethings, hit its sales growth forecasts for the year and said it was confident about its prospects, sending its shares up around 12 percent at the open.

ASOS is moving fast and is as differentiated as ever. The potential for our business is huge,” said Chief Executive Nick Beighton.

It made a pretax profit of 102 million pounds in the year to Aug. 31 – just ahead of analysts’ average forecast of 101 million pounds and up from 80 million pounds in 2016-17.

Retail sales rose 26 percent to 2.36 billion pounds, with growth of 23 percent in the United Kingdom and 27 percent overseas. Active customers increased 19 percent.

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

“We believe that ASOS remains a structural winner, given the shift online by consumers, together with harnessing the global opportunity as the ‘go-to’ platform for online clothing,” said Shore Capital analyst Greg Lawless, maintaining a “buy” stance.

ASOS forecast sales growth of 20-25 percent for the 2018-19 year and said it expected to grow at that rate for the medium term, with annual capital expenditure of 230-250 million pounds.

The stock closed on Tuesday at 5,000 pence, valuing the business at 4.2 billion pounds.

(Reporting by James Davey, Editing by Paul Sandle and Mark Potter)

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