I kind of agree on the turnaround having happened. I think this would be better described as a recovery from some daft procurement decisions made when supply lines went west. The profit will return once that supply is fully shifted and it will rerate as the YoY comparisons start to look good for ASOS and average for mid market bricks and mortar retailers. But don't expect this to bounce quickly to the pre Covid levels of £30+. I'm expecting another 24 months until the SP resembles something at the bottom of the normal range (circa £18). Then an offer might come in or 2026 looks good and it'll stretch its legs.
I've been Bearish on ASC for 12 months. I'd underestimated the mess they'd got themselves into in 21/22, but this update shows all the signs that the changes they made and the plan to rectify it have worked. The dream scenario of a minor revenue decline has not come to pass, but the concerns I had over liquidity and an aggressive takeover are now ebbing away. All things being equal this will see a steady move up from the current price and although it's clear that there is increased competition in this space, it should still be x5 to x10 the current £3.60 price once the turnaroubd is complete. If Inditex and Zalando can perform well in this space despite the pressures of Shein, then ASOS can also thrive. It will be a leaner and meaner business by FY25 - unlikely to be seen by the MMs as worth £70+ again - however it should remain a strong player. Not every share has to be boom or bust.
It's one of the most naive pieces of journalism I've come across. It feels like a student has entered the work place for the first time and told everyone how horrible Capitalism is. Amazing how companies with regulation and monitored practices get torpedoed while unregulated Chinese corps like Shein continue to eat market share peddling products that seem to be made with off cuts from the Party Shop.
Any excuse to hammer the price seems to be jumped on so probably down 10% again this week....
CAPEX does seem too high but what is reported by the finance team isn't always what it seems. All organisations will shuffle costs and sales from Q,H, or Y depending on what the management/ownership/board encourage. If you've been following the Asc story over the last 4 years the key challenge is of there own making by over stocking because of supply problems post pandemic. All companies go through a purge of staff and management that make bad calls like this. It will take another 12 months to get this under control and then the profit will start to show on the balance sheet. There are about 120m shares in circulation so once we get back to £100m profit then we should be £10-14. If the forward outlook is looking stable- even if revenue is closer to £3bn than £4bn, then it can return to £25+ quite quickly. Management don't see a path to this in 2024 so the MMs won't buy at scale as they need to show returns sooner than that when their funds are struggling to generate profit in 2023. The next 12 months are likely to see low trading volumes and price will therefore slip occasionally. I suspect it will range between £3 and £6 during that time and then a positive trading update in October 24 will lift the volume and we'll see the re-rates on price back to where the majority feel this belongs.
I can't see an acquisition here - if the data is showing debt is going down as reported in H2 and profitability is achieved back end of 2024 then price would be well over £3bn to pique the interest of the major parties. If the numbers are not accurate then an MA might be possible at a significantly lower price point. My hunch is that there is more control and focus at the helm so I trust the numbers.
Agree OWJ89. NEXT up 20% in past month, ASOS up 25%, Zalando up 25%, Boohoo up 32%. Biggest fallers have had a slightly higher gain since early October. Retail across the board has seen sentiment improve, but expect more bumps in the road until the light at the end of the tunnel is brighter and definitely not a bus coming the other way.
Also my view. It will likely drop further but every set of results from retailers for the next 6-12 will show similar or worse. The online platforms seem to have been hit harder and worse than bricks and mortar, but when losses come in from the high street then they'll catch up. A large scale online retail offering has to exist, and we won't all be buying hand made fashion from cottage industries on Etsy for the next 5 years.
The clairesmith account used to share some really insightful stuff on this board as the SP dropped 2nd half of 2021....now just seems to support a takeover at a price £150M below the close price 8 weeks ago....so is it a ramp and then deramp account? Takeover speculation and certainly the arbitrary figure of £1bn would cause a huge loss for 90% of this board....if there's something substantial behind why this might happen then happy to hear it, but feels like a random number plucked out of the air.
Shorters fear a company collapsing. Their aim is to get out well before the administrators get called in. Key targets are relatively robust organisations, with deep enough pockets to avoid a hostile takeover, at a time of poor market sentiment. As with investing the other way, they have a buffer so can tick their short down as sentiment reverses - there may be a short squeeze but I can't see that in 2022. Retail outside the ftse 100 are prime for shorting right now - but equally I'd expect to see a significant bounce once the winds change....and they will....they always do. It might take 6 months or 6 years - that's something most PIs struggle with.
Anything is possible, but it wouldn't seem like the smartest business decision to sell your company at the time it sits at a 10 year low because of cyclical factors, a temporary war, and less profit than last year. Do we really think the largest shareholders would be open to selling the entire business at a level equivalent to the share price a few months ago?? M&A happens when a business is struggling and requires external investment, or the price is at the upper end of its recent historical performance, or its key shareholders are desperate for the cash, or there are significant synergies in working with a competitor. None of these things are the case. 9 months ago I saw people on this board speculating over a £4bn takeover from Amazon....owners of 50%+ of ASOS are not going to jump at £1.2-£1.6bn valuation a few months later - this is not Ted Baker with 3 years of slide, huge losses and massive overheads. As many of you are saying - whoever won a takeover would make a killing - ie. the current largest shareholders are not minded to give that away at the first sign of trouble - it would be mental.
Agree Dimi. We need some sensible views when this happens as my first reaction was to try a different device as i thought my phone was glitching :) I know there are plenty of us in the 70% down club and I already took the average down route, so now time to wait, let the macro factors play out over the next 12 months and the MM's can make their millions as we sit on our hands and wait for it to drift back up.
I thought there would be far more problems in this....not seeing it as a catalyst for a drop. My concern is I missed the 63 again in expectation of high 50's and don't think it'll get down there again to average down as I'd planned.
Me too Dimi....paper loss well into 6 figures. Trying not to obsess about it, but this is a hard watch. Need a 2 year holiday to somewhere with no WiFi.
I think a few of us thought sub £25 was good business and now it feels like we'll need to hold until next year to see returns. Personally I have some target points to average down further, we're near the last of them, and I'm going to stick by them as a lot of my bread and butter stocks haven't moved down to the degree my retail stocks have so I see greater opportunity here than to try and navigate a 10% uplift with ftse100 stocks over the next 6-12 months. I've been caught like this so many times in the past - you keep seeing lumpy drops so you wait to see the bottom, don't call it right and it whips up and then you hold off as you missed the first big uptick - which rolls into 4 weeks of gradual momentum and you can't bring yourself to add as it would have given you 25% more if you'd been brave enough last month.........reading this back it sounds like a need therapy so I'll stop there! :)
I think investors have to accept this SP has cycles - far more so than it's traditional competitors. I've been through the doom and gloom on ASOS so many times - whether it was the warehouse burning down in 2014 and collapsing it under £20 or the pandemic madness in 2020 taking it under £10. The markets are knee jerk and time will heal the current wounds. I'm not sure why anyone would think bricks and mortar stores will fair better over the next year - if anything you might find more of the competition is gone by summer '23. Shein might also get it's wings clipped in the next 12 months as relations with China become more fraught. So as long as the management continue to perform well, a strong CEO is appointed, and supply chains resolve as inflation takes effect - then it will get back on the up cycle. I expect it to double or triple from here within 12 months but realistically we might have to wait until '24 to reach the past trading highs. GLA
I agree on the 'don't panic sentiment'. I've caught so many stocks half way down the slope when I thought they were on the turn (as I did here with ASOS at £25), but they still had 6 months of drift and further dips - but then 18 months later I'm up 30%. The stock market can seem illogical, sentiment can drive you crazy - but as plenty of others are saying - the fundamentals are good - a CEO will be announced at some point soon - and even if the trading update seems to make things worse tmrw. in 6 months time it will improve and then in 2023 this price will seem like a distant memory - in a very similar way to how £60 feels now even though it cruised up to that only a year ago. Patience people!
I've got a few things wrong over the years, but most significant moves in price make sense in the long run....however I'm struggling to understand how this keeps tracking down. I know it has 'teeth' and I've been on a ride with it once or twice over the past 10 years, but I can't make a case for the current PE being a quarter of the number it sat at in Spring/early summer last year. Have a sizeable chunk of the MMs forgotten the consistent growth from the past 5 years? Or the purchase of one of the most recognised high street brands at a snip? Or the millions of extra profit they made in the pandemic which means they don't need to carry a huge debt burden? Or the decline of their bricks and mortar competitors? And that's macro stuff you can all see - then there's my own anecdotal evidence in the business consultancy world that ASOS is the 'shining example' of a successful eCommerce channel in Europe (said on a call we were on today) and my niece specifically requesting ASOS vouchers for Xmas and my neighbour having 2 ASOS bags a week now delivered to her door.
Don't get me wrong - I've loaded up here, so have a vested interest, as I never thought prices under £20 would happen again for ASOS - but talk of these 'head winds' I thought could take it down to £40....but £15...it just seems insane.
Anyway - got that off my chest - probably best to get my takeaway and think about something else this weekend :)
It's a natural reaction to feel sick to your stomach when you check the SP today, but remember it has to shift around to make you money over time, otherwise you might as well keep your cash in Lloyd's. Price is impacted by macro events, while value might take time to show when those events melt away....and they always do eventually.....if they don't then we're all doomed so what does your investment matter anyway? And also worth remembering this is a healthy business with strong revenues, customer base and decent profit....not Ted Baker :)
@MSG4GO - I have a position in BOO as well but not as much as exposure as ASOS. To caveat - I appreciate that they have a different demographic and the marketing methodologies are significantly different - however they appear to have jumped on the same slide - the side by side for the past year is very similar to how the property developers look when you compare them, as though they're attached at the hip - although in December the SP graphs diverged and BOO looks to have suffered that bit more recently because their Dec results and profit warning was more negative than ASOS in Jan. I think the issue around reputation caused by suppliers paying below minimum wage does not weigh on the current BOO SP, it was addressed and I certainly don't see one of their key competitors, SHEIN, offering a more ethical alternative. Therefore I have to expect that the BOO SP should go north within the next 6 months along with ASOS....if....inflation can be suppressed, the supply chain stabilises, and tech/online is back in vogue. I would therefore see BOO 150-200 by the autumn....however there are plenty of bumps in the road.
@scallop - if you're referencing half of 72 - then I absolutely think that is achievable in the next 6 months. However...IMO there is no reason I can see for it pushing below 30 so sitting at 19 goes against all the predictions I had. A business that owns so much market share and is an aggregator of about 90 fashion brands , own brand sales mixed in, and a high brand loyalty demonstrated by the volume of customers signed up to their Premier service - should not be compared to a mid fashion high street brand that hasn't turned a profit for 2 years. The price cut from mid 50's to mid-40's was understandable for supply chain issues, then maybe a further cut to mid-30's due to the cost of living/fuel issues is plausible - but investors are well off the mark if they think this level of revenue and profit reported over the past 6 months, in a company with no significant debt to talk of, puts fair value under 30. A portfolio manager warned me the market was schizophrenic when I first started trading 30 years ago - and he wasn't wrong. Asos since July is a perfect example of a good business in a currently unpopular sector - so I think 6 months is a reasonable timeframe for that to turn.
Sentiment across this sector has been off for some time - war in eastern Ukraine will blip the whole market because of energy price concerns. Add that to the inflation and supply line pressure which has suppressed Asos well beyond what I think is a realistic floor. However, in 6 months the pieces on the board will have moved. In July last year I was on a group discussing the demise of BP and Shell......now they're 50%+ up. Value and price are 2 different things and the only way we achieve strong returns on our investments are to take advantage of these market wide flash crashes. I wouldn't bet the house on it, but surprised if Asos isn't £35+ by the end of the summer. Not a calendar year it hasn't been above £35 at some point since I've been trading it.