Published On: Fri, Jan 19th, 2024

ASOS sizes up new plan for challenging times | City & Business | Finance

The group looks to trim costs and improve resilience with more focused investment and plans to write down around £100million stock.

A fresh approach is welcome news for the online fashion and cosmetic retailer, after a year where shoppers have had to face rising living costs.

Discounting has helped entice cash-strapped customers, but it’s put pressure on margins. Underlying operating profit fell 79 per cent last year to £44.1million, with operating margins down to a thin 1.1 percent.

The new strategy calls for fewer sales to help push margins back up – but that relies on shifting the excess stock first.

That will have a hefty impact on results in the coming half, with benefits starting to come through later.

New marketing and investment strategies are on the cards. Given world markets are key for future growth, ASOS needs to start delivering here.

ASOS does have some strong foundations to build on. It’s set up well to offer something for everyone, with options all along the price scale.

That should help keep customers coming back, even if wallets tighten. The Premier programme, offering free delivery for a year, is also looking promising.

The growing partnership fulfilment arm also looks good.

Brands supply inventory and ASOS collects a commission on sales. ASOS isn’t on the hook for holding stock so there’s less risk, while attracting higher margins.

Progress will likely play a big part in the plan to have operating margins above eight percent in the future.

The balance sheet seems in decent shape for now, with ASOS having recently negotiated better terms on its loans.

However, it’s important a free cash outflow north of £300million last year turns positive at end of the new financial year.

Short-term challenges are reflected in a significantly lower valuation over the past year. The group trades on a price-to-earnings ratio of 12.0.

“This article is designed for investors who make their own decisions without advice, if unsure whether an investment is right for you, you shouldseek advice.

Shares can rise and fall in value so you could get back less than you invest.”

Source link

About the Author


Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>