Companies: ASC   

In the past three months, shares in online fashion retailer ASOS reached an all-time high of 417p – a gain of some 5,035% on our 2004 recommendation at 8.13p – before promptly halving on wider economic concerns.

However, this fall has offered ASOS supporters the chance to buy in at a bargain price, which has in turn sent the shares rebounding 40%. The stock now trades for 24 times 2009’s consensus earnings estimates of 11.4p, enough to put the wind up any bearish investor.

But online retail has numerous advantages over its bricks and mortar brethren, chiefly based around cost and convenience, and ASOS’s customer base of 16 to 34 year olds ‘views clothing spend as non-discretionary’, says broker Arbuthnot, making revenues much more resilient. Thus in six months to the end of September, as the UK economy shrank for the first time in 16 years, ASOS’s fashion-conscious followers drove revenues up 107% year on year to £65.7m. Even in the seven weeks since, as unemployment hit an 11-year high, ASOS customers piled into high-shine leggings and Christmas party dresses to send year-on-year sales soaring 104%.

A front-loading of costs into the first half – mainly into personnel to cope with a huge tripling in the number of product lines to 19,400 – meant pre-tax profits were short of expectations at £4.1m, a rise of 64%. Chief executive Nick Robertson says this expansion of lines – which includes a new maternity range and even ranges from a number of stores with their own high street presence – makes ASOS ‘a completely different company’.

Buttressed by £8.9m of cash on the balance sheet, Robertson has nascent plans for international expansion, where he spies ‘huge potential’, having already enjoyed 252% overseas growth during the period from the UK site.

Having shown its resilience and still with massive potential for growth, ASOS is a buy.

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ASOS	AIM	£198.24m	272.75p	2.25p
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