* Investment in warehouses and IT to hit profits
* Capex hike to cut 2013-14 operating margin to 6.5 pct
* Sales capacity to treble to 2.5 bln pounds within a year
* Shares fall up to 22 pct
(Adds detail, CEO, analyst comment, updates shares)
By Neil Maidment and James Davey
LONDON, March 18 Shares in British online
fashion retailer ASOS hit a 5-year low on Tuesday after
the firm said it would invest more rapidly in infrastructure to
meet future demand at the expense of short-term profits.
ASOS, founded in 2000 by current chief executive Nick
Robertson, is a favourite of internet-savvy 20-somethings and
has also attracted high-profile fans including singer Rita Ora
and U.S. First Lady Michelle Obama.
Its shares have doubled over the last year, giving it a
stock market value of 5.3 billion pounds ($8.8 billion) at
Monday's close. But they they fell as much as 22 percent on
Tuesday - their biggest one-day fall since October 2008.
"You can't win these days, you grow like stink, invest for
the future and (still) take a hammering," Robertson, who owns
9.3 percent of the equity, told Reuters.
By 1443 GMT ASOS had lost around a tenth of its stock market
value, which in turn wiped around 50 million pounds off the
paper value of Robertson's 9.3 percent stake.
ASOS said it would boost capital spending in the 2013-14
year to at least 68 million pounds - 13 million more than
previous guidance, as it bought forward investment to extend and
automate its warehouse in Barnsley, northern England, and
establish a "Euro hub" warehouse in Germany.
The investment, which will help speed up deliveries and cut
costs, will push the firm's annual sales capacity to 2.5 billion
pounds within a year, ASOS said, more than 1 billion pounds
higher than previously guided and more than treble the 769.4
million pounds of sales it achieved in the year to Aug. 31,
However, combined with investment in its China start-up, the
company warned the capex hike would reduce its 2013-14 operating
margin to 6.5 percent, below the 7 percent expected by analysts.
Robertson said the firm was now guiding to a 2013-14 pretax
profit of about 65 million pounds versus a previous expectation
of about 69 million.
"This is costing us but it's our belief it's the right thing
to do," he said.
Analysts cut forecasts to reflect the new guidance.
"The lowered full-year operating margin guidance and raised
capex support our longer-term thesis that the cost of growth
will keep coming in higher than market expectations for ASOS,"
Liberum analysts said.
However, analysts at Barclays were more supportive. "It is
valued on sales growth rather than near-term earnings, and
growth expectations have not changed on the back of the second
quarter statement," they said.
ASOS posted a 26 percent rise in retail sales to 136.7
million pounds for the two months to Feb. 28, the bulk of its
second quarter, missing forecasts for 33 percent growth, in part
due to unfavourable currency movements in Australia and Russia.
"That really is just an 8-week thing, if you take the half
year (retail sales up 34 percent) that's all fine," said
Robertson. "February was a bit weak and March has come back."
ASOS said it remained confident of achieving sales of 1
billion pounds in the 2013-14 year and expected its operating
margin to rebound in 2014-15.
Robertson said more detailed guidance on when the firm
expected to fulfil its new sales capacity could come at its
half-year results on April 2.
Analysts broadly expect ASOS to post sales growth of about
30 percent a year.
($1 = 0.6008 British Pounds)
(Additional reporting by Sudip Kar-Gupta; Editing by Kate
Holton and Ruth Pitchford)