ASOS’s share price: What to expect in upcoming earnings

ASOS’s [ASC.L] share price is on fire right now. Over the past 3 months, the stock has gained 60%, and it has risen 16% in the last month alone. August really saw ASOS’s share price drive higher, climbing over 45% in the month as investors lost confidence in rival Boohoo [BOO.L] following the Leicester “sweatshop scandal”. Also helping ASOS’s share price is the continued shift to online shopping. Is this enough to see the stock enjoy a post-earnings bump?

When is ASOS announcing full-year results?

14 October

What happened in ASOS’s last update?

One of the bigger business stories to emerge from the coronavirus pandemic is the rise of online shopping.

In the four months to 30 June, ASOS’s overall sales came in at just over £1bn, a 10% increase on the previous year. ASOS cited more warehouse capacity and a growth in active customers as reasons for the bump. The retailer also saw a growth in what it called “lockdown categories”.

Such impressive results are a significant driver for ASOS’s share price success so far this year, with the stock up 58.63% for the year to date (as of 12 October’s close).

However, UK sales dipped 1%, coming in at £329.2m compared to £334m in the same period last year. In the previous two periods, the UK market had posted double-digit growth. The dip coincided with the start of the pandemic, when revenues were hit by the cost of COVID-19 safety measures and the decision to pay back previously claimed furlough support from the UK Government.

Will double-digit growth come back?

Some clues might come from rival Boohoo's recent results, which saw a 45% jump in sales to £816.5m, with expectations that its revenue will grow by between 28% and 32% for the full year.

ASOS’s share price got a bump along with Boohoo’s last week after German online fashion retailer Zalando [ZAL.DE] increased its full-year profit guidance to €375m-€425m from €250m-€300m. The German retailer cited stronger than expected Q3 sales and profits.

“Our sense is that both ASOS and Boohoo will continue to benefit from the step-up in activities over lockdown and an acceleration in digital trends across the market, with both offering upgrade potential over peak,” said analysts at Peel Hunt.

Where next for ASOS’s share price?

In a statement released in August, ASOS said it expects revenue growth to be between 17% and 19%, with profits before tax in the region of £130m-£150m. Given the bumper numbers seen by Boohoo and Zalando, investors might be expecting more of the same from ASOS’s share price.

"The recent trading dynamics will deliver FY20 sales and [profit before tax] ahead of market expectations and further support strong underlying cash generation this year. However, the extent of this outperformance and any impact beyond this financial year will be driven by how customer shopping behaviour normalises," said ASOS in an August trading update.

Senior management are certainly confident of ASOS’s share price future. In April, directors and senior managers bought 42,537 shares at £15.60 each in a fund raising. Since then ASOS’s share price has soared, with the value of that investment now worth £2.15m. Chairman Adam Crozier and CEO Nick Beighton are reported to be sitting on a paper profit of £1.5m, according to The Sunday Times’ Alex Ralph.

Among the analysts tracking the stock on Yahoo Finance, ASOS carries a 4,263.19p price target. Hitting this would see an 18.9% downside on ASOS’s share price (as of 12 October’s close). Despite this, of the 26 analysts offering recommendations, five rate ASOS a Strong Buy, and 9 rate it a Buy.