UK retail - ASOS and Brick&Mortar volatility

All,cAs per my mail a week ago, even ASOS are struggling in this UK retail environment. But not as much as we expected.

Away from its automation issues in Europe and slow brand stocking in the US, the UK business is not growing as quickly as it used to. As the company is struggling with high returns volumes it has had to introduce penalties for returns, which appears to have an impact on sales. So we expected the company go grow sales at its more recently assumed lower growth rate before factoring in the dismal May.

Interestingly however, ASOS managed to keep sales growth in line with the previous 6 months - and seemingly without dropping earnings. EBT is guided to be slightly down from previous guidance, but due to other issues and by a minimal amount only. Net of those issues the guidance is in fact slightly up.

So what does that mean for New Look. Matalan had already warned that online retailers will have had an advantage during the wet spring. New Look have a more sizeable online presence than Matalan, but we know they have suffered extremely - again. Again online pure plays seem to have stolen a march on New Look.

In the past unseasonal weather patterns would impact every competitor in a similar way. Some more some less, but within a short time-frame lost sales, say from last week, could be made up the following week. Now it appears these sales have already been made by an online portal and the resulting trading volatility in brick&mortar shops has increased.

Wolfgang