UK E-Retailer Ups Stakes In US Market Despite Amazon's Prowess

Express, Inc. EXPR's stock has more than halved over the last year. Everyone’s forsaken Abercrombie & Fitch Co. ANF, and Urban Outfitters, Inc. URBN suffers comps deterioration.

But the climate of young-adult retail isn’t a deterrent for ASOS plc ASC, which is taking a more commanding step into the U.S. market with a new $40 million distribution center.

Perhaps its confidence is just. The U.K.-based e-retailer reported £94.4 million in U.S. sales for the four months ending June 30 ━ a 38-percent year-over-year increase in the segment.

But this figure already represents deceleration from 2016’s U.S. growth of 53 percent and 2015’s 43 percent, and heightening competition in the online retail space may further staunch ASOS’s growth.

The Amazon Narrative

With a modest market cap of $6.5 billion, ASOS is the most valuable online fashion retailer in the U.K. and is taking up the challenge of confronting the formidable Amazon.com, Inc. AMZN.

In 2016, Amazon boasted the most online apparel sales among U.S. millennials of any retailer, controlling 16.6 percent of sales in the demographic ahead of Nordstrom, Inc. JWN (8.1 percent), Gap Inc GPS’s Old Navy (5.1 percent), J. Crew Group, Inc. (4.2 percent) and L Brands Inc LB’s Victoria’s Secret (3.6 percent).

ASOS ranked ninth in millennial apparel sales with only 2.9 percent of the market.

The ASOS Potential

It’s essentially joining a pool of Davids warring with a seemingly invincible Goliath, but joining the fray may not prove a death sentence for ASOS as it has for other American retailers.

With U.S. sales representing a mere 14 percent of total revenue, accelerated growth in the European Union and non-U.S. international markets and continued growth in the U.K. may buffer the American investment risk.

"This agreement is a major step forward for ASOS in the U.S. and demonstrates the opportunity we believe lies ahead in this key market," CEO Nick Beighton told Reuters Tuesday.

The new Atlanta location to open in 2018 will hasten U.S. deliveries, about 25 percent of which currently ship from Ohio with the rest originating in the U.K.

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