Sharecast - ASOS (LON:ASOS) shares slumped after the fast fashion retailer reported wider interim losses as shoppers continued to tighten their belts amid the cost of living crisis, even though the company said it was confident of a return to profit in the second half.
The company posted a loss before tax of £291m, compared with a loss of £15.8 a year earlier. On an adjusted basis, losses were £87.4m in the six months to February against a profit of £14.8m. Revenue fell 10% to £1.84bn on a constant currency basis.
Shares in the firm were down almost 13% in morning London trade. ASOS started an overhaul of its business model last October which led to a £203.5m one-off charge.
ASOS, along with online rival Boohoo soared in popularity during the Covid pandemic on demand for their products surged during the Covid pandemic when high street rivals were closed.
However, supply chain issues, a return to more normal post-pandemic work patterns and the cost-of-living crisis have hit their business models.
The company had cash and undrawn facilities of £408.6m, but full-year free cash forecasts were for an outflow of around £100m, around the bottom end of previous guidance.
“We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile, and are taking action to reduce the proportion of our sales which are not profitable," said chief executive José Antonio Ramos Calamonte.
"Initiatives are in place to drive a further £200m of benefit in the second half and I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond.”
ASOS forecast a "low double-digit" decline in second half sales but core earnings of £40-60m, reflecting its focus on profitable sales, assuming there was no improvement to the trading environment.
AJ Bell investment director Russ Mould said the results "are as ugly as sin".
"It's all very well having a turnaround plan, but at some stage you have to show results and it feels like ASOS should have been delivering the goods by now."
"The company implies the economic backdrop has been unfavourable which has hampered its progress. It's at times like these that consumers look for bargains which means ASOS's decision to cut back on markdowns is somewhat ill-timed. Yes, it is prioritising profits over volumes, but it also needs to be in tune with what the consumer wants."
"ASOS has suffered in the past from having too much inventory and too much discounting, which has essentially made the customer associate the brand with cheap products. If it takes away the discount carrot then customers are going to turn their nose up and shop elsewhere. ASOS has been the architect of its own mistakes and is now paying the price."
Pub chain JD Wetherspoon said it expected annual earnings to be at the top end of expectations and tipped 2023 to be a record year for sales.
The company said like-for-like sales increased by 9.1% in the 13 weeks to April 30, compared to the same period in 2019 before the Covid pandemic.
Sales in Easter week were the highest-ever for the company, with sales in the current financial year “likely to be a record”, Wetherspoons said in a trading update.
Compared to FY22, like-for-like sales increased by 12.2% in the third quarter and by 12.7% in the year to date.
Trading over the last two bank UK holiday weekend had been mixed, with the May Day “exceptionally strong” - including the chain’s busiest-ever Saturday, while the second, for the coronation of King Charles, was slightly less strong, “with a noticeably quiet Saturday” as people stayed home to watch the event.
"Lockdowns and associated restrictions have had more profound and longer-lasting consequences than most economists, politicians and commentators predicted,” said outspoken company chairman Tim Martin.
"Sales in the last quarter have continued their positive momentum, although inflation, especially in labour, energy and food costs, remains a more intractable issue.”
"The company expects profits in the current financial year to be towards the top of market expectations."
Holiday giant Tui on Wednesday reported narrower losses and an increase in revenue as travel rebounded from the Covid pandemic.
Second quarter underlying losses before interest and tax came in at €242.4m, compared with €330m loss a year ago.
Group revenue surged to €3.2bn, up from €2.1bn in 2002 “reflecting the strength of demand for our products in a restriction free travel environment” with sales above pre-pandemic levels at improved prices, Tui said.
Bookings were up 13% year on year and had hit 96% of pre-Covid 2019 levels, with average prices for summer trips up 5% over last year.
"Strong booking development and significantly improved quarterly figures underline our expectations: it will be a strong summer and a good financial year 2023 with a significantly higher operating result," said chief executive Sebastian Ebel.
Berenberg cut its price target on Marshalls on Wednesday to 330p from 350p after the company’s trading update a day earlier.
Marshalls shares tanked on Tuesday after the landscaping and building materials group cut annual guidance on the back of a 14% fall in like-for-like sales, due to lower new house building and continued weakness in private housing maintenance activity.
Berenberg said: "The update highlighted the continuation of tough trading conditions in the UK new build and private repairs, maintenance and improvements (RMI) markets, ultimately resulting in the company guiding below prevailing market expectations.
"As such, we update our numbers to reflect the further deterioration, resulting in a decline in 2023/2024/2025 earnings per share of -14%/-12%/- 10% respectively."
Berenberg said it thinks Marshalls has some high-quality assets in the business, but is dependent on a recovery in UK construction market volumes that, at present, is just not there.
"As we have flagged in recent notes, the macro environment is undoubtedly tough in the near term and we wait to see how demand levels evolve in the coming months," it said.
Berenberg rates the shares at ‘hold’.
FTSE 250 - Risers
Wetherspoon (J.D.) (JDW) 786.50p +5.64%
Marshalls (MSLH) 284.00p +4.41%
Just Group (JUST) 88.70p +4.11%
Ithaca Energy (ITH) 157.10p +2.68%
Dechra Pharmaceuticals (LON:DPH) 3,754.00p +2.40%
W.A.G Payment Solutions (WPS) 98.60p +2.28%
IP Group (LON:IPO) 53.50p +1.90%
Mitchells & Butlers (MAB) 184.00p +1.77%
Liontrust Asset Management (LON:LIO) 806.50p +1.51%
LXI Reit (LXI) 102.90p +1.48%
FTSE 250 - Fallers
ASOS (ASC) 521.00p -18.06%
TUI (LON:TUIT) AG Reg Shs (DI) (TUI) 542.40p -3.56%
Vanquis Banking Group 20 (VANQ) 221.50p -3.06%
Savills (LON:SVS) 929.50p -2.67%
Ninety One (N91) 179.20p -2.40%
Sirius Real Estate Ltd. (SRE) 79.45p -2.40%
Ibstock (IBST) 172.30p -2.32%
International Distributions Services (IDS) 239.60p -2.08%
Tullow Oil (LON:TLW) 25.60p -1.92%
ITV (LON:ITV) 77.34p -1.78%