ASOS (LSE: ASC) told us Wednesday that it has gained 3.1 million new customers in the year to 31 August. It saw revenue rising by 19%, and earnings per share quadrupling after a down year last time. As I write, the ASOS share price is down 9% on the day. I guess the market is hard to please. But it is still up 45% year-to-date, one of the pandemic’s big winners.
Meanwhile, things are also looking good over at Just Eat Takeaway (LSE: JET). For the third quarter, the fast food delivery firm reported a 43% boost in UK orders, with a worldwide total growing 46%. Year-to-date, UK orders are up 27% with global orders up 37%.
Long-term shift
The ASOS share price performance in 2020 shows the obvious attraction for investors. As does the slightly lesser rise of the Just Eat share price. But isn’t it short-sighted to be buying shares based on their resilience in the face of a renewed lockdown or other restrictions? We should be buying for the long term, right? Well, I think recent events have given us a clearer view of what the long term is going to look like.
I’m writing this from Liverpool, currently under the most severe of the new Covid-19 restrictions. I also came across an article this week that suggests this coronavirus is likely to become endemic. Thinking about such possibilities further convinces me of one thing: we’re in the midst of a long-term change in shopping habits.
Liquidity
Cash and debt are critical to so many companies these days, especially those on the other side of 2020’s social changes. I looked at Cineworld recently, for example. The pandemic measures have effectively halted the cinema operator’s business, and debts are piling up massively. The next few months could be make or break for the firm, and its very survival could be at stake.
ASOS has no such problems, and I think that’s reflected in the ASOS share price. There was modest net debt on the books back in August 2019, of £90.5m. But that’s turned into net cash of £407.5m this year. The firm reported rises in sales around the world: up 18% in the UK, 22% in the EU, 18% for the USA, with the rest of the world seeing an 18% rise too.
Interestingly, it seems that buyers are returning fewer items now. That’s always been an issue with online fashion selling, as people buy lots to try on and just keep what they like. ASOS, along with Boohoo, has been refining its returns policy.
ASOS share price, or Just Eat?
Which is more attractive, the ASOS share price or Just Eat? The latter hasn’t recorded any profits yet. Analysts do, however, expect a modest €74m in net profit for the current year, rising to €179m in 2021. As always, in the first year or two of a growth company’s profits, fundamental measures aren’t that useful. A P/E multiple, for example, doesn’t really mean anything until we get some idea of a company’s longer-term profit levels.
Against that, I think Just Eat still has terrific global growth potential. You know what Just Eat reminds me of? Yes, ASOS a few years ago. I’d buy both. For a Covid-19 lockdown and beyond.
