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Online fashion retailer ASOS hits U.S. warehouse snag

FILE PHOTO: New employees wait in the lobby on their first day of work at the ASOS headquarters in London April 1, 2014. REUTERS/Suzanne Plunkett

By Paul Sandle

LONDON (Reuters) - ASOS's new U.S warehouse struggled to cope with demand in its latest quarter, hitting sales there and adding to challenges in France and Germany, the British online fashion retailer said on Tuesday.

The news was the latest setback for the one-time market darling following a shock profit warning in December, and sent its shares down as much as 13 percent.

Chief Executive Nick Beighton said the company's U.S performance was behind plan because higher-than-expected demand at its new facility in Atlanta caused a significant despatch backlog, which had now been cleared.

"These delayed shipments will be recognised in (the current quarter) and U.S. trading is now regaining momentum," he said.

As ASOS struggled to cope with the upsurge in U.S. demand it cancelled marketing and promotions, Beighton said. These would now run in the second half of its financial year.

The setback came after a profit warning in December sent ASOS shares tumbling to a four year low and raised concerns among analysts that online retailers might not be as sheltered from the headwinds facing the sector as assumed.

Shares in ASOS, which had regained some ground since December, were down 8.6 percent to 39.38 pounds at 1240 GMT.

Beighton said there was a "slight improvement" in own-brand fashions, which account for about 35 percent of sales, in the firm's fiscal second quarter after a weak first quarter.

"We've seen lots of green shoots within the womenswear category, some enhanced performance in the menswear category, but it's not quite where I want it to be yet," he said.

ASOS had also not played its "best game" in France and Germany, he said, but would improve delivery with the opening of the second phase of its European hub in the second half and invest more in marketing and prices.

ASOS reported an 11 percent rise in total retail sales at constant currencies to 641.3 million pounds in the quarter to Feb. 28, below its 15 percent revised target for the year and a long way off the 25 percent the market had come to expect.

Hargreaves Lansdown analyst Laith Khalaf said ASOS's market valuation was still relatively pricey at 47 times earnings, though well down on the 70 times seen last year.

"Investors will be hoping this is just a stumble, rather than a fall from grace," Khalaf said.

Beighton said ASOS continued to outperform in Britain, with quarterly sales growth of 14 percent, and forecast the improved U.S. performance and planned changes in France and Germany would help "deliver stronger growth in the second half."

He was confident ASOS would meet the full-year targets it lowered in December.

(Editing by David Holmes and Mark Potter)