The last few months have seen the ASOS (LON:ASOS) share price trade sideways despite a decent H1 trading update from April.
The online retailer is set to announce its Q3 results on Thursday. Will the latest numbers see the ASOS share price back on trend?
ASOS share price unmoved by H1 profits
In the first half ASOS reported a rise in gross profits of 19% to £890m on revenues of £1.98bn. This has resulted in adjusted profits before tax rising by 275% to £112.9m, despite slightly higher costs of £15m due to Brexit, a number which was reported back in January.
The ASOS share price had taken a sharp dip in February 2020 as the Covid-19 pandemic started to have a global impact. However, the new reliance on online retail saw the share price rise again, and hit highs for the year of just under 6,000p in April.
Acquisitions to boost ASOS?
In February, ASOS acquired the brands of Topshop, Topman, Miss Selfridge and HIIT brands for £265m, fully funded from cash reserves.
The brands became available after the collapse of Sir Philip Green’s retail empire, Arcadia. The group went bankrupt after a lack of investment, and the inability to keep up with online players such as ASOS. It cited the Covid-19 pandemic’s ‘material impact on trading’ as the death knell for its high street outlets.
ASOS swept up the brands, but not the physical retail spaces, and now has a host of well-known, legacy labels to add to its catalogue. Integration costs came in lower than expected.
ASOS has also just announced a tie-up with US online retailer, Nordstrom, which will invest for a minority holding in the former Arcadia brands. ASOS will retain control, but Nordstrom will provide US market expertise. ASOS CEO Nick Beighton described Nordstorm, who had an existing relationship with Topshop, as “the right partner to help accelerate the growth of our Topshop and ASOS brands in a key market.”
Economic reopening a drag on ASOS share price?
Part of the reason for the lack of upside could well be down to the fact that most of its business is online and with the UK economy on a reopening trajectory more people are likely to be keen to go out and shop having spent all the winter indoors. As we head towards 19 July, the latest ‘freedom day’, the fear for ASOS investors may be that the reliance of their consumers on online shopping may dwindle, as people embrace the ability to return to activities such as shopping, that just 18 months ago seems routine, but now present an adventure.
This may well impact the ASOS share price after Q3, although management remained confident that despite the easing of restrictions, full-year forecasts were still in line with expectations.
What will the Q3 numbers mean for the ASOS share price? Find our when the retailer releases its latest figures at 7am on Thursday
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