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Https://www.reuters.com/business/retail-consumer/uks-asos-posts-18-drop-first-half-sales-2024-03-26/
https://m.uk.investing.com/news/stock-market-news/uks-asos-posts-18-drop-in-firsthalf-sales-3401348
https://www.retail-week.com/fashion/asos-to-hit-profit-guidance-despite-sales-fall/7045879.article
The delayed results for ASOS.com have been published today.
When deciding which link to share, most of the daily newspapers have headlines such as "losses widen" and "falling sales" and "warehouse closures". (I've gone with Sky News' as an example).
Most people following ASOS' trading pattern over the last few months will be aware that the new CEO, Jose Antonio Ramos Calamonte, is currently overseeing a "Driving Change" agenda.
What the headlines are not stating is that Calamonte's turnaround plan has resulted in:
🔹clearing 84% of the £1.1bn of stock carried forward into FY23
🔹stock levels reduced by 30%
🔹increased profit per order of 30%
🔹free cash flow up £125m YoY despite double digit revenue decline
Implementing a turnaround takes courage and time. Taking steps to extend your runway to implement the turnaround is a big part of that.
The sale of the TOPSHOP TOPMAN brand may be appropriate given that the customer experience was very much in store, which ASOS of course is not. That cash will no doubt assist in the short to medium term.
ASOS might just be starting to turn the corner; here's hoping that it continues.
Link: https://www.linkedin.com/posts/heatherbamforth_asos-predicts-a-second-year-of-falling-sales-activity-7125421046542807040-0cnU
Jelena Sokolova is a Morningstar senior analyst covering ASOS.
“Kolostyak: So, ASOS is one of the most undervalued stocks in Morningstar's coverage. And upon these earnings, you adjusted the fair value estimate to about £13. The stock is trading at about £3, £4 at the moment. What makes you believe that it has room to grow?
Sokolova: Yeah. So, currently, the company is going through troubles, obviously, but I think, there is still potential with increased online penetration for European apparel overall. The stock is trading on absolute levels quite cheaply at 0.3 times revenue. So that suggests continued weakness and declines. And something that we don't factor in, but maybe also of consideration for investors that it could become an acquisition target with, for instance, SHEIN being quite active on that front. It's not something that we factor into our forecasts, but that's sort of an additional thing to mention about ASOS.
Kolostyak: So, back to the report then. Was it very bleak altogether or were there any bright spots to kind of highlight for investors who are maybe a little bit more worried?
Sokolova: Yeah. So, on the good side, they are taking some action to improve the situation. So, currently, the results are not showing yet in their revenue and profits. However, on the inventory side, the inventory has declined by around 30%. An improvement of supply chain is upcoming, and we see some indications of improving results here. Another thing that I would like to mention that they are focusing on their more profitable orders and that kind of hits the revenue growth, but it is good for profitability. And finally, we're also concerned that decreased marketing spending would hurt the online penetration and online growth going forward from all these firms. However, we are encouraged also yesterday that they mentioned that they will increase their marketing budgets going forward to attract new customers to this improved supply chain value proposition. The only thing is that the results are still not there. So, I guess, the market needs to see some evidence of this actually paying off”.
Link to the video: https://www.morningstar.co.uk/uk/news/242237/asos-stock-of-the-week.aspx
Regarding the last update, The following was written in the article ‘Is now the time to jump on the bandwagon and buy ASOS shares?’ (Motley Fool 13 November 2023):
“On 1 November, it released its results for the period from 1 September 2022 to 3 September 2023. Year on year, these showed a drop in revenue of 10%, a decline in margin from 43.6% to 41.1%, and an increase in the pre-tax loss from £31.9m to £296.7m.
A bit of a disaster? Well, dig a little deeper and I think there’s some evidence that the worst might be over.
Removing the exceptional costs associated with a stock write-off (£133.2m), reducing its footprint (£60.7m) and one-off consultancy fees due to restructuring (£31m), presents a different picture.
With these adjustments, the gross margin improved to 44.2%. And the loss before tax was £70.3m.
The company expects to be cash positive in 2024. It also forecasts revenue growth in 2025. And it hopes to get back to its pre-pandemic EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 6% (2023: 3.5%).
For comparison, achieving the same margin in 2023 would have improved the company’s result by £212m
However, if I had some spare cash, I’d be tempted to buy some shares.
Although a recovery is far from guaranteed, I think the future emphasis on profitability at the expense of sales is the right one”
Asos shares are currently trading at levels not seen since 2009. The company has far more brand recognition, sales infrastructure, and active customers than it did 15 years ago.
From 2009, the shares continued upwards, rising over 1,800% to March 2014, when it was around £69 a share.
It dipped to around £19 in October 2014 but then rose to over £75 in 2018. Then, it fell again to around £10 in 2020 before rising again to £57 in 2021.
Since 2021, it has continued to fall.
The question is, has online shopping come to an end? (NO, as it is only increasing.) Will the cost-of-living crisis, high inflation, and low consumer spending continue? (No, market conditions have been improving.) In addition, there is significant takeover interest in ASOS (last rejecting a 1 billion takeover bid from a Turkish firm in 2023).
The history of ASOS tells us that this company has had significant ups and downs, but in the end, it has proved to be very resilient, rewarding patient investors.
So William Barker Purchases £1,724,502.07 worth of Asos shares on 26 February 2024, £63,800.10 worth of shares on 27 February 2024, £47,450.00 worth of Asos shares on 28 February 2024, and a final trade worth £93,725.00 on 29 February 2024.
That’s around 529,500 Asos shares purchased for around £1,929,477.00
That is a massive sign of confidence in a company. Considering that the next trading statement due on 26 March 2024 is for the period up to 03 March 2024, if he expected the stock price to sink, then surely, he would not put in a tremendous amount of money.
Worth a read:
https://www.undervalued-shares.com/weekly-dispatches/the-battle-for-asos-crunch-time/