Member Info for FED1

It was revealed in October 2022 that Mike Ashley first built a 5% stake in ASOS. The share price was over £5. The share price did rise to over £7 in coming months. In August 2023, he increased take to over 10% when share price was below £4. I would guess that Ashley’s cost price is nearer £4.

The Ashley-Povlson dynamic is interesting.

I think Ashley bought Asos for three reasons:

1) It was undervalued long-term

2) strategic benefits to Frasers (such as Fraser Pay)

3) Potential acquisition target

I think 2 and 3 are becoming less likely for Frasers. Povlson has more at stake with TopShop JV. He wants Asos more and will not sell.

If Ashley sees no strategic merit in maintaining Asos, then I think it could be persuaded to do a deal to sell to Povlson (or at least consider to take it private as part of a JV with Povlson). For the right price, Ashley will sell. Likewise, Ashley has many other targets so he may want the cash to refocus elsewhere.

I was tempted to average down but it is already an oversized part of my portfolio. I will not buy any more and have a cost price of over £8. I may trade my existing position.

I’m pleased for those who topped up at below £3

Spare a thought for the junior equity analyst at BNP Exane who downgraded her recommendation to underweight (sell) from neutral (hold) on 17 March 2025.

I don’t think it’s a rights issue for simple reason now. If ASOS intended to raise capital, it would call the big shareholders and ask them if it can make them insiders. Povlson could have said no. However, assuming he did, he would not have been able to buy beforehand. Therefore, logically, ASOS has not approached its largest shareholders about a rights issue.

I think the shareholder register does provide a backstop to minorities should this get worse. I don’t think either of the large three shareholders will want to risk buying this out of administration should it go bust. Too much already invested. They would take it private.

Apparently, Mike Ashley and Anders Polvsen do not get on. Each of their position in Asos prevents the other one from making a bid. It is a stalemate. Maybe William Baker (Camelot) can act as arbitrator. I think at this share price though, they may put aside their differences and look to take Asos private.

If this gets any cheaper, the main shareholders may as well put in a joint bid for minorities.

Technically, I would assume that he called the CEO and they reaffirmed guidance given in January.

Whilst I’m relieved to see a large shareholder buy, it does suggest that he is not inside on any market sensitive news. This would include a rights issue.

To give credit to the sell-side analysts, they have been correct in recommending investors Sell. However, all it takes is one strong earnings results for the sell-side to upgrade to Hold or BUY. They tend to be slightly behind the curve when it comes to the inflection point. I hope the next set of results will be that inflection point and Calamonte can show that his strategy (Test and React) is working.

I sense they are ahead of Boohoo in sorting out its inventory. Also they have premiumisation edge over Boo; Zalando say premiumisation is what is driving sales. Given the depth that Calamonte has gone to in his presentations to explain the migration of the stock (inventory) to fresh and reactive, you would assume that this is now showing up in headline figures. If not, then Calamonte has some explaining to do in earnings call.

I think as long as Like-for-like is not double digit negative (i.e., -9% or better), than this would be good for share price.

Risks in Earnings

1) Revenues: They have guided for a continuation of current revenue trends into 1H 25. Revenues fell -16% in FY24 and we were not given H2 LfL. However, mgmt did say that in 4Q, revenue improved in the UK. For the full year they are guiding -9% to +6%. There has been talk of high conversion rates during Black Friday and we are told that inventories are now "clean" with full priced newness. However, the read across of -16% from BooHoo is concerning as its most direct comparable.

2) Free Cash Flow: Mgmt has guided neutral FCF for the year but seasonally, 1H 25 is a cash outflow year. They have sold most of the old inventory and I would assume this is an one-off cash inflow as they do not need to restock to £1bn in inventory going forward. We have been told US closure is not a cash item. I reckon that last 1H24 was an one off as they structurally reduced old inventory. This tailwind is not going to repeat in 1H 24 so I expect negative FCF in 1H which will be offset in 2H.

3) Margins - Everything is suggesting that margins will improve on an adjusted basis.

4) Balance Sheet - We thought we were out of the woods given recent restructuring. It is not inconceivable that they do a rights issue although that will raise questions about why they didnt sell TopShop to Shein/Private Equity.

"A conversational narcissist is a person who always diverts the topic of the conversation toward themselves. Somehow, these people always manage to make everything about themselves. They monopolize the conversation, completely uninterested in other issues or what others have to say."

So the sell off was caused by a downgrade from a junior equity analyst (CFA Level 1) at BNP Exane. Good grief the BoD need to get control of the narrative in this shambles. Are we expecting a consecutive 24th day of decline?

https://www.thisismoney.co.uk/money/markets/article-14508559/Asos-falls-fashion-Shares-crash-17-year-low-major-downgrade-City.html

The news vacuum is a big threat to share price than a bad earnings announcement.

Logically, you would imagine that ASOS mgmt team are working to bring forward the earnings release. Surely today has underscored the necessity to be proactive?

The headline that "Investors Lose Confidence" sums it up nicely.

While the share price halve and fell for 22 consecutive days, the BoD said nothing. If ever there was a time to allay fears. Today's capitulation is a reflection of the lack of action by the BoD. Now they have been bounced into saying something sooner than they wanted.

Get those damn results published or get off the BoD!

Calamonte has indicated that US writedown is not a cash flow item but it will impact reported profit. I am fine with this.

I want them at the very least to hit revenue guidance. If revenues decline double-digits, then Calamonte should go.

If there is a profit warning, then the market will not care about Calamonte.