Asos Shares Plunge 19% On Growth Fears

The share price of online fashion group Asos has plunged by nearly a fifth over fears about its future growth.

When markets opened at 8am the share price dropped 15%, before falling even further.

In mid-morning trades the drop eased to 13% down.

The downbeat investor reaction comes after the group increased capital expenditure and lowered its full-year margin.

The retailer said it would increase a capital spending programme to achiever longer-term growth rather than short-term profit.

Asos said that in the six months to February 28 total group revenue was up 34% to £482m.

Although UK sales were up 32% to £182m and EU sales up 65% to £77m, sales in the rest of the world (RoW) were only up 14% to £116m.

This compared to RoW sales up 37% in the same period during 2012/13.

Furthermore RoW sales - responsible for 29% of non-UK sales - struggled in the last two months, rising only 3% compared to the same period last year.

Although its retail gross margin was up by 0.6% on the previous year, it fell by 0.3% in the two months to February 28.

The number of customers joining the Asos database eased slightly.

Although they were up 36% on the prior year to 8.2 million, the figure was down from 40% growth seen a year beforehand.

Asos now expects to see it hit annual global sales of £1bn.

CEO Nick Robertson said: "The group delivered strong sales and margin growth over the first six months of the year and we are now confident of achieving £1bn of sales in FY 2013/14."

Key capital expenditure costs include investments in China, IT expansion and boosting warehouse capacity in the UK and Germany.

Barnsley is the main UK warehouse centre for the group.

Asos was launched in 2000 and listed on London's AIM exchange in 2001. In 2010 it launched American, German and French sites.

The company, which targets people in their 20s, has also had to contend with the rise of Boohoo recently.

Its rival aims to provide fashion for teenagers and people in their early 20s, and its share price jumped 50% on flotation last week.

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