Why outdated ASOS shares are down 5.7% today | Bot To News


– ASOS close to appointing restructuring advisers

– M&Co collapses into administration

– Julian Dunkerton is in talks to take Superdry private

It’s been a terrible year for shareholders ASOS (ASC)with the online fashion retailer’s stock falling the best part of 80% in a series of declines.

Shares fell a further 5.7% to 551.5p. today amid speculation that the company is close to appointing restructuring advisers to help it navigate the current bleak environment for the retail sector and, in particular, for the online channel, which is underperforming brick-and-mortar. To date

Talks to bolster ASOS’s finance department by adding a restructuring expert follow the recent shock of interim finance director Katy Mecklenburgh leaving to join the IT retailer. Softcat (SCT).

Although Mecklenburgh doesn’t leave for six months, the news added to the somewhat chaotic feel of the business.

MIKE ASHLEY WILL THEY MAKE A MOVE?

“Whether or not ASOS has liquidity problems remains to be seen,” commented Shore Capital, “although if there was a call for shareholder help one imagines it would be undertaken at a fairly significant discount to the current share price.”

Keeping a close eye on developments will be Mike Ashley’s phrases (FRENCH)which has amassed a 5% stake in beleaguered ASOS.

News that Frasers had built a material stake came days after the online fast fashion firm’s new chief executive, José Calamonte, outlined a turnaround plan as ASOS fell into the red for the year to August 2022.

Russ Mould, chief investment officer at AJ Bell, said “reports of the search to hire a restructuring specialist indicate the level of stress ASOS’s balance sheet could be under.

“By ignoring the adage that you’ve got to fix your roof while the sun is shining, ASOS has left itself vulnerable to the effects of people returning to in-person stores, higher product returns that are expensive to process, rising costs across the country business and a drop in demand thanks to the weak economic outlook.

“Some of these are short-term headwinds, but what will really worry shareholders, and potentially lenders, is that the whole fast-fashion model will struggle to recover thanks to a more frugal and ethically minded consumer.”

M&Co APPOINTS ADMINISTRATORS

Most clothing retailers are struggling with rising costs and inflation-induced pressure on consumer spending.

To illustrate the point, value clothing retailer M&Co has just collapsed due to what administrator Teneo called a “sharp increase” in input costs with a quick sale of the business now being explored.

M&Co’s move into administration follows the recent high-profile collapse and partial rescue of Joules (JOUL:AIM) by Simon Wolfson’s Next (NXT).

Elsewhere in the industry, unloved fashion retailer from Superdry (SDRY) Shares rose 2.7% to 108.2p. following a report that co-founder and chief executive Julian Dunkerton was in talks with private equity firms about a possible buyout, after becoming disillusioned with its poor share price performance.

However, there is Primark, the discount fashion chain it owns Associated British Foods (ABF)where trading is said to be “encouraging” with the new store opening schedule underway.

DISCLAIMER: The financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.

LEARN MORE ABOUT ASOS


Issue date: December 12, 2022



Source link