What was a slow, steady decline – 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 PLC (LON:ASOS) now sits at a consensus rating 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 PLC(LON:ASOS) has a consensus rating of ‘Buy’ alongside an average target price of £49.16.
Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved.