Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
Https://www.ajbell.co.uk/articles/investmentarticles/275032/asos-looks-better-times-ahead
A very well written & balanced article for a change. Lots of challenges but equally plenty of potential light at the end of the tunnel :)
James I’ve just listened to the podcast. Thanks for sharing. The only thing worrying me is the convertible bond which is due in 2026. £500 million pounds. I’ve touched on it before but this out of everything I heard, whilst not new, is my biggest concern by far.
Article suggests a premium would be offered for Topshop if one did materialise. Exactly what I was thinking.
https://ww.fashionnetwork.com/news/Can-asos-keep-topshop-as-shein-and-authentic-rekindle-interest-,1625532.html
Can ASOS keep Topshop as Shein and Authentic rekindle interest?
By
Sandra Halliday
Published
today
Apr 18, 2024
News last year that Shein and Authentic Brands Group were interested in buying Topshop – currently owned by ASOS – seemed to be just a rumour. But now the speculation has resurfaced and given the well publicised problems at ASOS it could mean that a takeover by one of the fast expanding businesses is more likely.
Topshop
ASOS bought Topshop in the wake of the Arcadia collapse and despite the brand having struggled under the previous owner, it remains a globally-known and in-demand label. That makes interest from big players unsurprising, as does the fact that ASOS still faces huge challenges in its turnaround, despite talking of making progress when it delivered its results this week.
The Times claimed Thursday that Shein is among a number of potential buyers that want to take control of the brand with Authentic also believed to have shown fresh interest.
None of the parties concerned have commented on the newspaper’s report.
It said ASOS is believed to have received “non-stop interest” from a range of high-profile retailers. This further underlines the brand’s appeal and status despite the issues of recent years.
ASOS paid £330 million to buy Topshop, along with Topman and Miss Selfridge, from failed Arcadia in 2021. At the time, its rivals to buy the business included Next, Frasers Group and Shein, according to reports.
Last year, ASOS has reportedly considered selling Topshop in the face of its own widening losses and ballooning debt, although nothing happened at the time, even though Shein and Authentic were said to be interested.
Both of those giant businesses are acquisition-hungry and both have shown enthusiasm for buying UK properties. Shein, for instance, acquired Missguided from Frasers Group, while Authentic is the owner of both Ted Baker and boot company Hunter.
They both have very deep pockets too and would be able to pay a premium price if ASOS was in a position to hold out for one.
It's unclear whether Shein and Authentic would be rivals or partners in buying Topshop as they have existing links with each other. Shein last year acquired an interest adding up to a third of Sparc Group. That’s a joint venture between Authentic and Simon Property Group.
But one big question here is whether ASOS would want to sell one of its top-performing units to a business like Shein that has become a thorn in its side. It’s a major rival whose success is partly responsible for ASOS’s sales struggles in the past couple of years. Anything that would strengthen its rival is likely to be bad news for ASOS.But its current problems may force it to take actio
I wonder how much has been offered for Topshop. Ultimately I think the right decision is to hold onto the business. It’s the jewel in our crown. That said, ASOS was successful long before it acquired Topshop. I think if the price is right it could be worthwhile exploring a sale. SHEIN appear to have bottomless pockets (if appearances are as they seem) and regularly make decisions at any cost. Perhaps a silly offer will be tabled that simply can’t be refused? Interesting either way.
Https://www.theindustry.fashion/will-asos-hang-on-to-topshop-as-shein-and-abg-encroach/
Will ASOS hang on to Topshop as Shein and ABG encroach?
CHLOE BURNEY
18 APRIL 2024
ASOS continues to receive "non-stop interest" from high-profile retailers, including Shein and Authentic Brands Group (ABG), to take Topshop off its hands.
ASOS, which is in the midst of a turnaround plan, was last year reported to have been considering the sale of Topshop to help cover growing debts, however, this never came to fruition. Now, it has garnered fresh interest from ABG and reignited interest from Shein.
The e-tailer purchased Topshop from the administrators of Sir Philip Green’s collapsed Arcadia Group for £330 million in 2021. At the time, it beat the competition, including rivals NEXT, Shein and Frasers Group.
As one of ASOS' top-performing brands, Topshop is considered a "valuable asset" within the retail industry.
Despite turning down previous offers, ASOS may reconsider as it falls deeper into the red. In 2018, the e-tailer was valued at upwards of £6 billion, which was more than rivals Marks & Spencer and NEXT. However, its shares have since fallen by 94%, in contrast to NEXT'S which have risen by 71% during the same period.
Just yesterday, ASOS published its financial report. The company revealed widening losses after half-year sales plunged by nearly a fifth as it presses ahead with "necessary action" to turn the business around, including the appointment of a new CFO. It posted underlying pre-tax losses of £120 million for the six months to 3 March against losses of £87.4 million a year ago.
Shein’s renewed interest in Topshop comes as it proceeds to expand its presence in the UK. Last month, it opened a debut pop-up shop at Liverpool ONE. This comes after the company recently opened a hub in Manchester, which is the home of the UK fast fashion industry, housing HQs for the likes of Boohoo and In The Style.
Shein recently made headlines for being in talks to list an IPO on the London Stock Exchange. It was initially reported that Shein was in talks with London Stock Exchange bosses at the end of last year. Should it go ahead in London, the Shein float would be one of the biggest blockbuster IPOs in the UK in many years.
“Like someone else said you're going to need a series of good results to get anywhere near an offer of 10 pounds.
That's 3x now. That's quite an ask with all the competition etc.”
Al4x, I’m not sure it is as big of an ask as it may seem. Take Jan 2023 for example. The share price rose from circa £5 to £10 by the next month! That was with the exact same competition there is now.
Agreed :) all eyes will be on debt, cash flow and outlook. I hope there’s a few golden nuggets in there: Fresh ideas and innovation, like Zalando and their new approach/updated strategy. We are definitely on the right track with KPI’s improving on all fronts, but we desperately need impactful news to send the sp rocketing. I’ll take a positive update on metrics but it would be great to see a new idea, concept etc. News of India, further details on AI, review of charges for example. Better still, something out of the box that we weren’t aware of that will underline the bottom of the sp once and for all and really reignite us.
Hi SJ. Was interesting reading about millennials and gen z and also the search facility and volume of products. You’d hope the marketing and sales team analyse data on exactly this. One thing I definitely agree with is product volumes. There offering is too large and can lead to indecision so they definitely need to look at this. I think what is good is after the hash they made with mass over ordering of stock, they’ll have a real keen eye on all these issues and we’ll turn the corner with a more critical eye. Most importantly we need sequential positive trading updates showing increased profitability and then the £3’s will be long behind us. The key is getting there and I’m still backing us to do it.
Comprehensive assessment of the fors and against there Simon! 🤣I’m not sure Barker and others support your theory with their recent investment running into the millions. Add to that not a single other institutional investor reducing or selling down and I’d say the situation is quite the opposite. It’s attractive at this price whether you believe in the long term turnaround or not because it either recovers or is bought out imo.
Well it is likely it will in truth. However asos are due to invest more in marketing and also apparel growth is set to grow so this has the potential to offset any lost income. It’s all educated guesswork, but I am still confident of the future here. We have a huge, loyal customer base and we are laser focused on the right product offerings and profitability, not growth at any cost.
Well we certainly wouldn’t want that. It would be good to hear the boards take on the situation during results. We don’t need anything else weighing down on sentiment. I’m sure asos will already be thinking ahead about the ramifications and will have plan b in place to address this. Would be shortsighted if they weren’t prepared with the next course of action in the event of this happening.
Continued..
Progressing but as other retailers close the gap, there is additional pressure to deliver. While the current valuation looks attractive, investors should expect a bumpy ride.
I’m hear for the long term so sounds good to me. Everything appears to be going according to plan :)
Https://www.hl.co.uk/shares/share-research/asos-sales-decline-as-expected
ASOS revenue was down 18% for the 26 weeks to 3 March 2024, as discounts were used to help clear excess stock.
Business transformation plans remain on track. The group is ahead on plans to improve stock efficiency and reduce inventory by 20%, back to pre-COVID levels (c.£600mn) by year-end.
Free cash outflows narrowed from £260mn to £20mn as clearing excess inventory helped free up cash. Cash on the balance sheet stood at £330mn, up 6.5% on last year.
There was no change to full-year guidance, including a 5-15% sales decline and positive cash generation.
The shares rose 3.1% in early trading.
Our view:ASOS is in the midst of a transformation, and profitability rather than growth remains the top priority. The transition isn't pretty, with sales declining at double-digit rates and the group turning loss-making. Sales are expected to keep moving lower in the new financial year but under the hood, there are signs that ground-level operations are improving.
Back in May last year, it took steps to shore up the balance sheet. Around £80m of funds were raised through issuing new equity shares and £275m worth of debt has also been refinanced. This cash injection has provided the wiggle room to execute the ongoing transformation which includes removing unprofitable brands from the platform and re-evaluating the returns proposition. The ongoing drive to slim down inventory has made good progress too. Having reduced stock levels by 30% last year, it’s ahead of targets to cut a further 20% by the year-end. The discounts used to help clear this excess stock have hurt the top line though, and that action looks set to continue into the second half with more deadwood left to clear. But once all this excess inventory is off the books, it should provide some tailwinds to ASOS' margins moving forward. Despite an improving outlook on the profitability front, there are still challenges to navigate. Active customer numbers were trending lower last year. This means for now, profitability and cash flow will have to come from streamlining current operations and squeezing more out of each customer. This needs to be managed carefully. Other retailers like Next are closing the gap, and compromising on what gives ASOS an advantage in service, like convenient delivery and returns, could impact long-term growth.
And, as part of the profitability drive, ASOS reallocated resources away from international markets, where extensive investment has so far yielded weak results. But cutting costs in areas like this could be problematic in the long run. International markets, especially the US, hold the key to the group's future growth, and sacrificing investment in these markets now could come back to bite ASOS when conditions recover.
Ultimately, there are long-term opportunities for ASOS, but short to medium term challenges shouldn't be overlooked. Transformation activities look to be progress
Https://www.bbc.com/news/business-68672700
No legal action being taken.
This is taken from the 2023 annual report. It was the outlook and suggested guidance so you can take a look at todays update and make your own mind up about how we’ve progressed:
“Outlook & guidance
Over FY23, we improved our core profitability, delivering c.£300m of benefits under the Driving Change agenda; made good progress on improving our stock profile; gained confidence in our operational initiatives including our new commercial model, Test & React, and Partner Fulfils; and laid strong foundations for the years ahead.
Our mid-term priorities are leveraging our strengths: to offer the best and most relevant product; be a destination for style; build a customer journey created around fashion and excitement; and offer competitive convenience. These things will drive our economic model, delivering stronger order economics and delivering better customer lifetime value.
In FY25 we expect to deliver revenue growth and return EBITDA margin to around pre-COVID levels (c.6%). In the medium-term we have confidence in our ability to return to double-digit growth; steadily improve gross margin back towards c.50%; maintain EBITDA sustainably ahead of cape, interest, tax, and leases; reduce capex to 3-4% of sales; and deliver inventory of c. 100 days.
FY24 is about taking the necessary action to get us to that path.
We expect the annualisation of Driving Change agenda profit initiatives to broadly mitigate the impacts of fixed cost deleverage from our expected revenue decline. However, our priorities of accelerating towards our new commercial model and strengthening our relationship with consumers require investment in the near term. These investments are twofold:
i) Incremental marketing investment of c.£30m (c.1% increase in our operating cost ratio) into re-igniting our brand, making ASOS famous for fashion again.
ii) The discounting of stock carried forward to exit the year with a clean stock position. We may use off-site clearance channels, sacrificing margin to limit cannibalisation.
As such, our expectations for FY24 are:
• Sales decline of 5 to 15%, with P4 FY23 trends (i.e., high double-digit declines) continuing through the first half of FY24 and a return to growth in the final quarter of FY24.
• Adjusted EBITDA positive.
• Stock back to pre-COVID levels (c.£600m as previously communicated).
• Capex of c. £130m..
• Positive cash generation, reducing our net debt position.”
A lot of boxes ticked imo.