MARKET REPORT: Asos shares fall another 20% as City analysts warned of further sales hit at the fast fashion group
Asos suffered another setback as City analysts warned of a further sales hit just days after the fast fashion group posted heavy losses.
Shares of the owner of Topshop and Miss Selfridge fell 20.7 percent, or 104.5 pence, to 400.5 pence – their lowest level since 2010.
The latest slump came when JP Morgan cut its price target on Asos shares from 1000p to 610p.
Credit Suisse also lowered its target price on Asos from 680p to 550p. The shares were trading at close to 6000p in early 2021, after peaking above 7700p in 2018.
The analysts’ notes came after Asos reported a loss of £290.9 million in the first half last week.
Sales drop: Asos struggles to cope with shoppers returning to brick-and-mortar stores after lockdown and reduced consumer spending
The investment bank told clients that the results understandably left investors skeptical about whether profits could be made in the next six months.
While acknowledging that Asos has made progress in cutting costs, JP Morgan said the slump in sales and the cost of refinancing the loan “raised questions”.
Asos is struggling to cope with post-lockdown shoppers returning to brick-and-mortar stores and reduced consumer spending.
The company is also hit by massive returns as customers return online orders. To counter this, it has pledged to phase out unprofitable brands as part of a wider overhaul of its business model.
But analysts at JP Morgan warned that sales could fall further in the near term, while the “mid-term growth outlook for pure apparel looks increasingly challenging.”
And in a similar assessment, Shore Capital analyst Eleonora Dani warned that the company’s “laser focus on immediate profitability threatens to stifle future growth prospects.”
The FTSE 100 rose 0.3 percent, or 23.08 points, to 7777.7 and the FTSE 250 gained 0.4 percent, or 70.38 points, to 19258.75.
After rejecting a proposal from its top shareholder to spin off its Asian operations, HSBC has unveiled plans to improve its performance across the region.
The banking giant told investors it aims to grow revenues in the asset branch by up to 9 percent over the next three to four years.
It also wants to increase lending by about 15 percent over the medium to long term, which could take up to six years.
Ping An Asset Management, a Chinese investment group with an 8 percent stake in HSBC, has called for an Asia-based and Hong Kong-listed spin-off company.
But the plan to split the company in half was rejected by shareholders at HSBC’s annual general meeting earlier this month, with investors voting 80 percent against the proposals. Shares rose 1.9 percent, or 11.3 pence, to 611 pence.
Shares in Royal Mail owner International Distributions Services rose 0.2 percent, or 0.5 pence, to 228.4 pence despite the launch of a regulatory inquiry by Ofcom into its dismal performance.
The communications watchdog revealed that for the year to the end of March, more than 26 percent of First Class mail was delivered late.
The figure is well below Ofcom’s minimum standards for Royal Mail, which is required to deliver at least 93 per cent of its First Class mail within one working day to meet its regulatory requirements.
But it wasn’t just First Class that fell short of expectations, with 90.7 per cent of Second Class deliveries arriving within three working days, short of the target of 98.5 per cent.
The performance is the worst since the figures were first published in 2007.
There was also good news for train ticket provider Trainline after asset manager Stifel upgraded its rating from ‘hold’ to ‘buy’ and raised its price target from 340p to 355p.
Shares added 5.5 percent or 14.8 pence to 282.6 pence yesterday.