Good morning! My attention has been on ASOS this morning, as the online fashion retailer has issued a profit warning, and the shares have plummeted to 2855p at the time of writing. I've been saying for a long time that the valuation was nuts, and indeed I was short of the shares when they peaked at 7000p, but unfortunately banked my profits far too early at 5000p. This share is a great example of how investors become intoxicated with growth, and momentum, and end up paying multiples of what the company is really worth.

I think we might well see similar crashes in other online retailers that are priced to perfection. After all, they're only retailers, who happen to operate through a website. What people forget is that, whilst they don't have any of the costs of retail outlets, they do have all the costs & hassle of delivery to the customers' homes. Plus they have more complicated warehousing requirements, and above all the returns rate on online fashion is about 30%. Same as it was for mail order, as online retail is the same as mail order, but using a website instead of a catalogue. So the margins overall end up the same as any other retailer, mainly because of the cost of disposing of all those returned items that customers don't want because they don't fit properly, or have worn once & fancy a refund instead of wearing it again. Whereas the returns rate for a bricks & mortar retailer is far lower, at 5-10%, because most customers try the product on, and check the quality in the store.

Anyway, let's get back to doing what I'm supposed to do, and look at some small caps!

 

 

 

 

Harvey Nash (LON:HVN)

This recruitment group has issued an IMS for the first four months of its financial year (ending 31 Jan 2015). It looks reassuring, with the conclusion stating;

 

Overall, the previously reported momentum gained in the second half of last year, and particularly the final quarter, has continued with the result that performance in the first quarter has been in line with the management's expectations.

 

More detail is given on Q1 trading;

 

On a like-for-like basis, in the first quarter compared to the corresponding period…

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