Fashion etailer Asos this morning revealed a jump in festive trade as retail sales increased 38% to £335.7m in the four months to December 31. Retail Week examines the city view.

Group Retail sales +38%, a strong performance underpinning our full year sales forecast of £1bn, +35.8% yoy.  Strong performance in UK & EU maintaining the strong momentum seen over H2 2013FY, against the backdrop of weak apparel markets in the UK. Looking ahead, we expect momentum to slow as the business fully annualises the prior year step up in digital marketing activity.  The EU benefited from additional payment methods, the roll out of Premier and better delivery options.  US sales momentum has slowed significantly from the performance from Q4. Sales of US brands are being impacted by a lack of zonal pricing as UK price structures. We remain strong advocates of the ASOS growth story. To a certain extent, 2014FY is set to be a year of investment and consolidation, with automation and an extension doubling capacity at the Barnsley warehouse and work starting to turn the US into a full service fulfilment operation. Peel Hunt analyst John Stevenson

ASOS UK sales were up 37% in the 4mths to 31 Dec, compared with consensus expectations of +29%. Europe was also strong, up 69%, versus +59% for consensus. However, the US was up 28% versus a 38% expectation and Rest of World just 19% versus 28% forecast. The introduction of better delivery options, payment methods and the roll-out of the premier service to certain international markets appears to be the driver of this sales mix. It is important to remember that ASOS is still basically working off one stock to serve the world. We will be interested to hear if weather has been an issue in markets like Russia (cf Mothercare pointing to an unseasonably warm autumn).  While the share price seems correlated with sales, rather than profit, outperformance, upwards momentum is likely to continue. However we are not convinced that ASOS has built a long term, sustainable competitive advantage. While we expect the business to continue to grow, our view is that this is unlikely to continue at the kind of growth rates implied by the current valuation. Liberum analyst Sanjay Vidyarthi

We expect the group to report low-to-mid 30% revenue growth for the full-year and a 40-60bps improvement in the gross margin. Work on doubling the capacity of the group’s Barnsley site continues and the group plans to open its European distribution centre later this year. We think much of the group’s share price trajectory for 2014 will be determined by its Chinese operation where it is too early to judge the potential success. At the same time consumer habits continue to evolve with mobile increasingly becoming the preferred channel. In theory this should favour larger operators who can invest in technology to support this growth. However we think mobile is also providing smaller operators with a route to reach new customers supported by an ever present voice on social media, thus reducing the influence of larger brands. Panmure Gordon Simon French

 “Despite many retailers finding the Christmas 2013 trading period tough, this impressive trading shows ASOS has no signs of faltering. The ability to achieve such market-beating growth is not solely down to ASOS’s position as an online juggernaut. Rather, it is a clear global perspective married with an astute understanding of its target market, supported by continued investment, which sees ASOS leap from strength to strength.”  Liz Faulkner, Conlumino

“The UK was again much stronger than expected, with +37% growth, but overseas was weaker than expected, with “only” 38% growth, despite +69% in Europe. The focus will be on the +28% in the US and the +19% in “Rest of World”. The latter is a surprise, with Oz probably a culprit, and though the impressive UK outcome should certainly be seen as reassuring, some people will be fretting about the overseas slow-down.” Nick Bubb, independent analyst

“We believe the company will focus on a limited number of markets with a view to making them as significant as the UK rather than taking a scatter gun approach to global expansion with the development of a small dedicated infrastructure in each market. It will also adapt the model to cater for zonal pricing, gear the assortment more to the local market and look to cross sell the ranges between markets.  In the UK, it now has all the major international brands on its website apart from Top Shop, Zara and H&M and is now in a better position to optimize the profitability of its brands. It is also looking to develop another brand to enhance the middle aged market, while keeping the Asos brand focused on the under 30s. Freddie George, Cantor Fitzgerald

Asos sales surge as Christmas shoppers flock online