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Asos accelerates investment as sales surge

Online fashion retailer Asos has made a strong start to the year with a 36% hike in first-quarter revenue, and says it will invest more in expansion after upping its sales guidance for the full year.

Total group revenue surged to GBP621.3m (US$763.8m) in the four months ended 31 December, from GBP457.1m a year earlier. Retail sales also increased 36% to reach GBP605.7m.

The online fashion retailer recorded growth in all of its regions, with the US seeing the highest sales growth of 66% to GBP82.7m. Asos's domestic market recorded a sales increase of 18% to GBP244m, while rest of world sales jumped 46% to GBP113.2m. Sales for the group's Europe division were up 49% to GBP165.8m.

"Following record sales over Cyber weekend and the Christmas trading period, I'm pleased to report a strong start to the year," said CEO Nick Beighton.

Asos said it reinvested the gains it made from foreign exchange movements into price cuts and US duty benefits, and consequently expects fiscal 2017 reported sales growth of around 25-30%, from a previous forecast of 20-25%.

"A 50% plus increase in international sales is a stand-out performance," Beighton added. "UK sales growth at 18% was a strong performance in a more promotional market. With sales for the year now expected to be up by c.25 to 30%, we're accelerating our infrastructure investment to handle that growth. Asos remains well set to meet its longer-term ambitions as a result of the hard work and commitment of the team".

Bernstein Research analyst, Jamie Merriman, says the retailer continues to deliver ahead of expectations.

"We expect investors to be particularly excited by the pull forward of investment in the US given the strong growth in the region as well as the size of the opportunity. We expect this capex spend will continue to sustain high levels of growth and forecast a five year sales CAGR of 23%. We believe Asos has significant runway to continue to grow."

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