ASOS (LSE:ASC) is an online-only apparel store targeting 20-somethings with a catalog of 65,000 products. We believe non-capital-intensive businesses that do not have a brick-and-mortar presence have the potential to significantly disrupt traditional retail competitors. ASOS has performed strongly over time, averaging more than 50% revenue growth per year over the past three-, five- and 10-year periods. In the second quarter, the share price was hurt by aggressive sales promotions and weak currency translation, which led to a profit warning for the year and a compression of the stock’s price-to-earnings multiple.§ As long-term investors, we favor high-quality companies that have the ability to sustain long-duration growth. We’re watching ASOS closely, though we believe the recent problems are short-term in nature.
From Wasatch International Growth (Trades, Portfolio) Fund Q2 2014 Commentary.
