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.....Oh, and I forgot to mention one positive about Shein. If they do go public in London, they'll have enough spare change to swoop up the likes of Boohoo and Asos, hopefully at a healthy premium. Perhaps they're not so bad after all. Yep, money talks!!!!
The Chinese mindset will be a long time changing. Morally speaking, no-one should be buying from Shein or a multitude of other Chinese companies. The reality is that, come the end of the day, most people will conveniently put it to the back of their minds and buy from them. Money is all important. The young fashion conscious crowd of today advocate everything green, moral and healthy and yet they will nevertheless buy from these sweatshop type concerns.
Shein is going to be a massive disrupter, until such time as the rest of the world decides enough is enough. London should not be offering Shein an IPO opportunity, but the LSE is desperate to gain business following the departure of others to NY. Purely from an investment opportunity, I again wouldn't touch it with a bargepole. It will enter overpriced, and I suspect will lose value for shareholders while making loads for the founders. Transparency will no doubt be negligible.
Jamesss....If I were to see the stock rising to £6 of its own volition and without approaches I would, on balance, be likely to retain the shares as it would already indicate a turning point in consumer confidence and in the company's fortunes and demonstrate ongoing momentum. However, if the shares got above £6 by way of a bid (that's a 75% premium on today's SP), I would seriously be considering an exit, (unless a 2 or 3 way auction emerged). A takeover requires reorganisation and a fair amount of time to consolidate and see the fruits, and I'm not sure if I have the patience any more. I've been encouraged by Barker's purchasing , but of course, it's not actually his own personal money (rather a long-term value orientated hedge fund) although he is paid to make money for his investors and is now a non-exec director. As I've said, at the moment, the market generally is not buying the enthusiasm of the CEO as evidenced by the shorts and current SP. My average is circa £7.30
KBYK...I haven't any game as such, other than to strike a balance on here and put a lid on some of the over-optimistic one-liners...you know, 'up to £15 by Xmas' types. Positivity is great but let's not over do it.
The CEO has presided over a difficult period and it would be fair to say quite a lot has been self inflicted. In my view he has that steeper hill to climb now due to factors I've already raised but which are not seemingly going away. Of course I'm merely guessing and interpreting the figures last time round. We have high debt, a lot at high interest (rates that may stay relatively high ftb), slim margins due to selling stale stock, inventory still too high which in my opinion will result in another write down at some point (no doubt it's been easier to get rid of the better stuff, but what about less fashionable items; as they say 'fast fashion simply goes out of fashion fast'), declining sales particularly in the USA, ever-increasing competition...Shein haven't touched the surface yet, I could go on. So , the question I ask myself is ''is cutting costs and clearing inventory at virtually zero profit, sufficient to return to profit?''. Very unlikely. Asos has got into this position largely via bad management and now some of the same are trying to rectify the situation.
Regarding my comment about 2026 being more likely to see a profit , if we're lucky, is associated with my above comments. Also when Calamonte says we won't see a pre-tax profit until ''at least 2025'', I obviously fear the worst. This is him being his usual hopeful optimistic self. the market doesn't seem to be buying it. On that basis I say 2026, altough then they have to contend with the bond issue.
Asos has got itself in a muddle, largely through lacking focus. Fast evolving consumer behaviour has previously outpaced Asos' ability to adapt. Others have bet right and have moved forwards to hybrid models such as H&M, Next, Frasers, and Zara. They're ahead of the game. MA knows online has a huge part to play but physical presence is also a part of it. An omnichannel service. Topman is currently wasted as a pure online play.
I know all this sounds doom and gloom but the company has at last recognised the need to be more agile and responsive. Despite the huge challenges, I can just about see glimpses of a turnaround, which is which is why I guess MA and Barker are in the fray. For me, I just want my money back which means the price more than doubling. I will not sell at the bottom. That invariably is a wrong move. With a reasonable chance of a momentum setting in or a bid, I'm sticking with it notwithstanding the risks. My main concern is a poor summer, and a cash call in the autumn!
Following the last months update, I think the CEO has a steeper hill to climb than anticipated. ASOS admits it needs at least until 2025 to return to a growth in sales and a positive pre-tax profit. On previous experience, that probably means 2026 then, where more hurdles linger such as the bond renewal. Debt is the major issue. As people know, I have doubts as to his ability and fear that cash could become tight between now and the promised turnaround of 2025. Why else would it explore a potential sale of its Topshop brand? While a sale would solve a short-term financial dilemma for the company, it would send bad vibes to ASOS shareholders. Selling off assets when predators know you are in dire need for cash will see potential buyers exploit the weakness.
Alternatively, will someone eventually bid for ASOS? I think this is fairly likely. This company would benefit from a single strong owner controlling things, radical changes implemented outside the public eye, and a strong balance sheet as well as retail expertise backing management. However, without the likes of MA, Povlsen or Next getting too involved, I continue to see ASOS as a crisis-ridden company that may have to go cap in hand again to capital markets. Shareholders would face further dilution. Meanwhile I believe Povlsen, a silent partner, is there for the long term (famous last words lol). He's had loyalty to the brand for such a long time. Barker also tends to play long but I think in this case, he and MA are in it to make money somewhat more quickly. Barker is investing his clients money and MA is purely an opportunist who sees this as a two way win. So many people say that Mike Ashley is a man without a strategy who places random punts on stocks. Yeah right, just look at Frasers, awash with cash with fingers in so many pies. Yes he likes a punt, but they are always measured and hedged. Meanwhile, with declared shorts still hovering between 5.5 and 6.5 , the SP ain't going anywhere soon, unless someone pounces. It is only this factor which is propping up the SP.
In an ever increasing overcrowded market, consolidation is inevitable. Boohoo and Asos continue to be in a precarious position and are vulnerable. I repeat, let's be realistic. If an opportunist bid is forthcoming it is highly unlikely to be more than at a premium of 40-60% (£5 - £6). Rarely does a company go above this. Hotel Chocolate was taken out by Mars at about 100% but that was highly unusual.
Frasers (+ 179% in 5 years) and now awash in cash. Asos -91% in the same period and highly indebted. MA sees Asos as a nice fit to his omnichannel plans. He and Next have got it right and are ahead of the game. The problem is, MA is unlikely to bid himself and probably merely hopes to benefit from an outsider bid, with a view to forming a strategic partnership of sorts.
Does anyone here feel as I do that Fevr has lost it's way a bit, with the SP floundering around the £11 to £12 mark? Now doing 'okay' but down 65% over 5 years. Surely this will eventually merge with someone like Britvic as a defensive measure, or be taken out by one of the giants. On that basis only, it may be worth a punt.
A shorting figure increasing to 6.21% is undeniably of concern as it indicates weakness and a return to a potential downward trend and, frustratingly, more of the same. Without an intervention by way of an offer, the SP is destined to, at best, stagnate. The latest RNS is irrelevant. MA, in theory, 'lost' his recent put bet and was obliged to take up some physical shares which I'm sure he didn't mind, knowing he would stay under 30%. I'm still counting on Shein as the main interupter if it lists in London. If it is allowed to list (LSE are desperate to reverse the present trend of companies leaving), it will be aggressive in it's expansion. Asos and Boohoo are vulnerable. I'd rather MA put in an offer and sort this company out but 'takeover bids' are not generally his style.
Alllornothing ....Thank you for clarifying that about Sean Glitheroe. I had forgotten he was only appointed on an 'interim' basis; so I was unfair in my comment. Mind you, look what happened to the previous company he was CFO at... Lol.
Have dug out bits between the waffle of the report. I remain underwhelmed. Hoped for better but we are just about keeping on track. Still promises of jam tomorrow. Waffle 'as the result of old stock and red seas delays there is a suboptimal level of newness providing a less compelling customer proposition' ! I will put a few thoughts out there.
The most risky area is Debt. Pretax losses widen to £120m from £87m last year. I've previously highlighted the incompetent borrowing facility last year at high rates. Inventory still too high.
West6809 sensibly reminded us of the £500m bond. Will need to be thought about in 18 months. We may just see some profits coming through by then, but interest cost on bond could be four times higher, maybe more. And where did that £500m go? Some was part of the finance restructure after the the TS aquisition. The rest was for global expansion. That went well didn't it? Sales in USA down 25%. Profit margins expectedly down due to clearing old stock, but I predict some further write offs. Impairment of £14m due to mothballing of Lichfiled site. What a waste. Shein market share rises from 1.7% to 2.2%..Asos share down from 3.1% to 2.4%. Shein chipping away. When they list in London they intend to mean business, and will have deep pockets, hope an offer for Asos! NY sensibly rejected them . Yes, a lot of their stuff is rubbish but they will continue to eat into market share. Asos have merely copied Shein's model....Test and React. It works quite well but hardly new. Time and again they blame something for low margins....selling old stock, having to slash prices to compete, Xmas discounts, unforeseen factors eg Red Sea woes, the weather etc Topshop is a wasted asset in my view. It needs a physical presence and MA knows this. As for Mr Calamonte, he says the new business model is 'showing promise'. We need more than that. This is the sort of guy who will probably only buy shares if a crisis occurs and he buys to prop them up. If he hasn't shown confidence in the share at this low price, while things are 'showing promise', why should I? As for the CFO role, Glithero didn't last long - 11 months. Dave Murray. Oh dear! Bankruptcy seems to follow him around like a magnet. 2019/22 at Farfetch, went bust. 2022/23 was at Matches, went bust and MA seems to have 'let him go'. I'm just hoping it's not going to be 3 times unlucky. There's a lack of substance in this report. MA sees this as an inefficiently run company but which could be turned around and would be a good fit for him. Other than takeover speculation, this share will stick around the £3.30 to £3.80 mark. A 100% rise is very unlikely short term. £15 by Xmas is cloud cuckoo land. Shorts need to reduce by at least half to get things moving. All in all, nothing to see here.
What a couple of months does for this share...up 17%. Volatile but long term rewarding. Almost have to eat my words from last post. Maybe this is a share that one can go in and out of to make a quick profit too.
I believe it is only non-excutive director Barker who bought loads of shares recently. And that was partly because he was invited onto the board as a defensive measure against predators like MA. Barker bought before the closed period started. He plays long normally. The CEO of course, has bought sweet FA.
Shorts creeping upwards (to 6.39%) prior to the results next week; partly thanks to their mates at Shore Capital whose sell note is premised on general information already out there and, as usual by them, is nothing but guesswork and is of little substance. Their suggestion is a possible reaction to maybe £2.80. Perhaps it could go there but I'm hoping much of the gloomy outlook is already built into the present price.
MA has generally won most of his bets over the last year or so. At the last expiry of a selling put, he more than likely lost, as he usually did deals when the SP was around £3.60- £3.90. On most expiries, the SP was above that. This time it was below, meaning he was obliged to increase his physical holding.
My main concern is obviously debt, not least the abysmal loan they raised at a high rate with, in my view, dodgy lenders.
I'm also hoping there are no surprises re 'stale stock', given the high inventory level, or an intimation of another cash raise. If the latter happens, Calamonte should be out immediately. If the promised savings are being achieved, he may stand a chance of survival, but if he isn't prepared to put his money where his mouth is ( into acquiring shares), then I don't think I'll add either!
I'm still crossing my fingers that there is a glimmer of light starting to appear. However, Shore Capital are certainly right that the likes of Shein will continue to chip away at sales. Only the strongest will survive. I hope for an approach this year.
Massey,,,see my comment of 26th March. I believe HL's basic 1yr, 2yr, 3yr and 5yr figures etc, are misleading. As far as I can see they are based purely on your original purchases, but do not include reinvested dividends. The best way to check the shares' performance is to see how much you paid for your major purchases and note the number of shares obtained. Then check the number of shares you have now, after the divs have been reinvested. Check the total value against what you paid for your lump investment.
I have long regarded HL research as pretty useless and therefore adds nothing to what we already know. What surprises me even more is little or no mention of Shein who is rumoured to enter the London Stock Exchnage after being rebuffed by NY. Despite what people might think, Shein are only just starting in their pursuit for dominance (unless the UK regulatory authorities intervene) and will, following flotation, hit the UK market agressively. The percenatage share for Shein in the UK online clothing market is already quickly rising and predicted to be the 6th largest apparel retailer in the next 3 years. Add the competition from the quality companies, and you end up wishing (indeed praying) that Asos merges or gets taken over by someone who really knows what they're doing. Calamonte doesn't cut it for me despite his commendable efforts to turn around issues that were partly his fault in the first place, given he was promoted from within.
Get Rich Quick / Spades / Zac .......My apology to all of you for the stupid comment I made, back in November 2023. I now realise I was misled by an HL advisor who said the share performance figures on their website over 1 to 5 years, includes Divs reinvested. On that basis I thought the performance for CTY was terrible. The performance figures actually shown do NOT include the divs reinvested, and merely the original sum invested.
Thank you all for clarifying it to me.
It was pleasing to see they managed to keep within guidance.
It was a brief update, lacking in detail, clearly designed to send a message to the market not to expect any shocks come April when the full figures emerge.
The usual positive slant the CEO gave came as no surprise. Post the results in April, if he doesn't commit to buying shares, then it doesn't give a good message.
I guess a fair bit of cash is being generated from the sale old stock at low margins. Fair enough, but what a big mistake in the first place. They are expecting the inventory to be down to £600m by the end of the year, which poses the question, what is it at the moment? Will there be further write downs?
Overall, I found these brief details underwhelming. The turnaround, as usual, is just around the corner. I do not see the shorts rushing to the exit doors quite yet. After the initial positive excitement, the SP could end up neutral over the next few days after profit taking and we'll be back to the usual £3.50 to £4.00 range. The shorts will have breathing space to slowly unwind if they see the wind changing.
I'm hoping one or more of the three major players may enact on this update to get the shares moving, otherwise it's going to be a bit of a slog.
I suspect results will be slightly below lower end forecasts, but with the usual positive spin and bs thrown in. My prediction (given the shorts are still well dug in), is a drop of 5%-10%, but recovering later in the week, on the basis there may be cost savings evidenced and the slightest glimmer of light at the end of the tunnel. I'm crossing fingers there's no over-reaction to poor sales figures.
Regarding a previous discussion this afternoon, brokers cannot lend your shares without a written agreement allowing it. unfortunately, some online trading companies like 212 seem to have a default position whereby when you sign up, you agree they can do this. It is then up to the account holder to disable this function. Most don't read the small print and so are unaware. However, it doesn't affect your ability to trade as usual. 212 do this because they have to find ways of making money (rather than charging dealing fees).
Samba69 One cannot believe a word Murray or his father-in-law says. An example was 'Matches' that Frasers bought in December as a long term strategic hold according to Murray, but was put into Administration within three months!
Minty87 Yes, it's interesting. As you say, if the price stays low, he will be called upon to take up a small amount in April and June (of 0.24% each). However it is not until August that he has another deal expiring worth 4.20%. I suspect he's betting the price will be above about £4.00 by then, thereby not being obliged to buy the shares. MA loves a bet.