Are ASOS about to bounce back?

Monday, 17th December 2018 10:42 - by Rajan Dhall

ASOS delivered their latest trading update for the first three months of the financial year today. Here are some of the highlights:

·      Total sales grew at +14% on a reported basis and +13% on a constant currency basis

·      Retail gross margin -160bps

·      Total orders placed 17.1m (+16% YoY)

·      Customer engagement: active customers +19%, average selling price (ASP) -6%, average basket size (ABS) +3%, average basket value (ABV) -3%, order frequency +5%, conversion +20bps

·      The Co. have reduced our expectations for the current financial year

·      November, a very material month for us from both a sales and cash margin perspective, was significantly behind expectations.

Looking at the weekly chart this looks like a tricky one. After a great performance between 2015 and 2018 the Co. look like they are in real trouble. Downgrading their projections seems prudent after such a bad November where the whole industry struggled. The market for me have pushed the price too far and this business is still a fundamentally good one. Today's news may send the share price further but value may kick in at lower levels, so keep an eye on the support zones on the chart. Technically the trendline break could indicate a further fall before we pull back, but the main thing supporting price here is the 4000p level.