Online fashion retailer ASOS (ASC:AIM) improves 62p to £69.36 on Thursday after unveiling forecast-beating sales for the first quarter. This includes the peak Christmas period and the outcome firmly places ASOS among the retail sector’s clear festive winners.

Yet the scope of the share price rise is constrained as the cutting-edge fashion seller’s gross margins grew less than expected in the period. The AIM giant also adds that full year capital expenditure is now expected to be £220m.

This is up from previous guidance of a £200m-to-£220m range, management investing in systems and infrastructure to support the e-commerce champion’s long-term global growth.

CHRISTMAS CHEER

A quick spin through today’s update, covering the four months to 31 December, reveals total retail sales up 30% to £790.4m. This is not only a beat versus expectations of 27% retail sales growth, but also comes in at the top end of full year sales guidance of 25%-to-30% growth.

Focused on the social media-savvy 20-something demographic, ASOS’ US retail sales shot up 24% to £102.4m, EU sales skipped 42% higher to £235.2m and Rest of the World (ROW) revenues rocketed 34% north to £151.9m.

But the Christmas quarter’s strong performance was supported by an outstanding showing from the UK, where ASOS highlights an acceleration in sales ‘in a challenging market’, retail sales shooting 23% higher to £300.9m, comfortably ahead of expectations.

CAP EX CREEPING HIGHER

Although there is no change to full year guidance, ASOS says full year capital expenditure is now expected to be ‘around the upper end of the previously indicated range of £200-£220m’.

CEO Nick Beighton is nevertheless ‘pleased to report a strong performance during the period including peak. We achieved an exceptional performance in the UK, whilst momentum in international sales continued. We acquired 2.6m active customers (defined as those who’ve shopped with ASOS in the last twelve months) year on year and saw encouraging movements across all key customer key performance indicators (KPIs).’

Beighton (pictured below) adds: ‘Velocity in our technology programmes continued, with a record number of releases. Our customer proposition was further enhanced in the U.K. with the launch of Try Before You Buy and ASOS Instant, our same day delivery proposition. Following this strong start to the year, we remain confident in our full year guidance and delivery of our planned investments in infrastructure to support our global ambitions.’

Numis Securities’ Andrew Wade, a buyer with an £85 price target, is suitably impressed, continuing to believe ‘that ASOS, having passed a financial inflection point, remains a uniquely positioned operator with a vast long-term global growth runway and increasing momentum.'

For the current year to August, Wade forecasts a surge in profit before tax from £80m to £100.6m, ahead of £120.6m in the year to August 2019.

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