Online retailing has been one of the most successful markets during the recession, with many companies managing to offset ailing high street profits using their website counterparts. Even for retailers that base their businesses solely on the internet, business has been booming, with sites such as Amazon and eBay consistently reporting mounting profits over the past several years.
However, much like the high street, online business can be unpredictable, with this week’s announcement that shares in clothing company Asos have dropped 15 per cent in only two days – despite the fact that annual profits rose 42 per cent this year. This has led to much speculation over the cause of this slump, with the belief that directors are planning a mass sell-off of market stock being widely circulated by the press.
Numis Securities Stockbrokers are understood to have made 27.5 million of the 81.5 million company shares available for purchase at the request of the Board of Directors. These shares were put on the market at a heavily discounted price, which has still led to huge profit generation for those who put a percentage of their shares up for sale.
Chief executive Nick Robertson, for example, put up a number of shares awarded to him as part of a long term incentive plan. After selling 744, 792 shares at £21.50, Mr Robertson walked away with a profit of £16 million, while still owning around 7.7 million of the company’s shares.
Asos Chairman, Lord Alli, also made £16.7 million through the sale of a percentage of his stock.
Greg Feehely, head of investor relations at Asos, refused to comment on the sudden and unexpected sale, but did say that the company would release a statement through the London Stock Exchange should this measure be required.
However, a spokesman for the company did state that the sale of so many shares was a reward for the “outstanding success” of this financial year and those preceding it. He also highlighted that Asos, which stands for “As Seen On Screen”, has generated £1.8 billion of shareholder value since the company was launched on the stock exchange.
Asos has gone from strength to strength, picking up more than 5 million online customers thanks to its focus on providing clothing for “fashion forward 20-somethings”. In the past five months alone, the business has reported a 37 per cent rise in revenues, equating to a staggering £403 million, with pre-tax profits rising accordingly.
The company is not only popular in the UK, however, as its consumer base in countries such as Australia and the USA continues to rise. Although business in the UK slowed slightly during the recession, the high demand from overseas markets allowed Asos to make up any deficit and even post a rise in profits.
Yet the online retailer will have to work hard to continue its unbroken run of success, particularly with doubts now flying around in the stock market as a result of the discounted sell-off.
Espirito Santo analysts, following the sale, said; “In order to get to the current share price, we need to assume unbroken double digit sales growth for the next ten years.”
With the recession in Britain finally over, as was announced last week, there is a high probability that the sales move by Asos was a method of getting the market moving competitively again, with much less caution required by traders now. However, only time will tell whether this was an intelligent move by the board of directors.
Why do you think bosses at Asos made the decision to sell off a lump sum of shares so suddenly? Do you believe that it was simply a reward to the directors for the admirable performance of the company over the past few years, or do you think there is more to this story than meets the eye?
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