Shares in online fashion retailer,ASOS plc(LSE: ASC) have jumped 16% in trading so far today, after the company posted results that were better than many analysts had expected.
Indeed, following what can only be described as a disastrous year for the company, ASOS reported a 27% rise in full-year sales and reiterated its outlook for the next few years. ASOSs strongest market was the UK where sales expanded 35%, compared to 22% internationally.
However, the company did report a 14% decline in full-year pre-tax profit. A fire at the companysBarnsley warehouse, a strong pound and a costly investment program were all cited as reasons for the fall.
Change in fortunes
Nevertheless, even though ASOS has issued three profit warnings so far this year, todays relatively upbeat results mark a change in fortunes for the company.
Along with todays results, ASOS also announced thatNick Beighton, chief financial officer, will becomechief operating officer with immediate effect. The group has already started a search for its newfinancial officer.
Commenting on todays results, CEONick Robertson said:
Despite all that happened this year, we still delivered 27% growth in sales, with the UK a standout performance at 35% growth. Our customer engagement was exceptionally strong we exited the year with 8.8m active customers, an increase of 25% over last year
ASOS has always beenabout the longer journey to a very big prize: to be the worlds leading fashion destination for 20-somethings, and we are firmly focused on our next staging post of 2.5bn sales
T0o early to buy?
Todays full-year results from ASOS were better than many analysts had expected. However, now may not be the time to buy, as ASOS still has a long road ahead of it before the company can claim to have recovered from mistakes made over the past 12 months.
Additionally, ASOS has warned that profit for the next year will remain unchanged, as the company invests heavily to boost its presence within China and other international markets. Still, while this spending will impact short-term profits, over the long-term these investments should pay off as ASOS will be able to provide a better service to customers.
But, until then, it seems as if ASOS is going to have to work hard to convince investors thats worth paying a premium for the companys shares. For example, ASOS is currently trading at a forward P/E of 45, even though earnings are expected to stagnate over the next 12 months.
Whats more, there is ASOSs relationship with suppliers to consider. Some suppliers have threatened to stop supplying the company unless it stops heavily discounting their products. ASOS has been aggressively discounting products in order to drive sales and draw customers away from rivals such asBoohoo.com, which have also been working hard to increase customer numbers.
Only time will tell
So overall, ASOSs full-year results reported today were better than expected. However, the company still has a long road ahead of it and needs to prove to investors that its shares are worth paying a premium for.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of ASOS. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.