What was a slow, steady decline for ASOS shares – well, after an initial first quarter rise to a record high of £77.70 – accelerated dramatically as 2018 came to a close. By the end of December the AIM superstar had fallen to a 4-year nadir of £22.89, cementing a 67% plunge across 12 months.
And while it has lifted from those lows in 2019, a lack of New Year statement has left it unable to post anything resembling a real recovery, the stock twice crossing £33.50 before pulling back. ASOS shares now sit at a price of £28.81.
Though its losses had started to speed up in November, the real flashpoint moment came in mid-December, when it shed 38.6% in the aftermath of its first quarter update. Following a November that saw sales ‘significantly behind expectations’, total group revenue rose 13% to £656 million.
That growth came at a cost. Due to big price cuts elsewhere, ASOS was forced to offer promotion after promotion to keep up, a move that slashed its retail gross margin by 160 basis points for the 3 month period.
Following on from this, the company now expects full year sales growth of 15% against the previously forecast 20-25%. Its profit margin, meanwhile, is set to be half of what was expected at around 2%. It also said that the weighting of its H1:H2 profitability, normally at 30%/70%, will see an ‘even more substantial weighting towards the second half’ of the year.
The impending interim statement was actually delayed from February 15th, the company wanting to cover the first half of its financial year rather than ‘reporting on much shorter periods’. Whether or not that was an attempt to manage bad news will be revealed on Tuesday. Investors are going to be looking for an improvement in sales from December onwards, alongside an update on the firm’s forecasts for the full year and its hopes for the second half.
ASOS shares have a consensus rating of ‘Buy’ alongside an average target price of £49.16.
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