ASOS PLC (LSE:ASC), the online fashion retailer, has been well and truly down on its luck in 2023, with its shares nearly halving as shoppers revert to traditional in-store purchases from the easy comfort of online buying, which has brought Mike Ashley's Frasers in as a shareholder.
Ashley and other investors will be keen to see if the retailer's fourth-quarter update, due on Tuesday, September 26, can give shareholders something to smile about.
Rivals such as JD Sports, Next, and even Dunelm have upgraded guidance in recent weeks and despite most industry players noting improving trading conditions and growing revenues, sales at the e-commerce group have faltered and the short sellers are circling.
Asos is the most shorted of any London stock with a net short position of around 6.8%, according to the ShortTracker website. The retailer leads the rot with fellow online rival Boohoo behind in second at 4.9%.
Analyst Aarin Chiekrie at Hargreaves Lansdown said: “ASOS has had a rough ride lately. With net debt and cash flows both rising earlier this year, it had to resort to raising around £80m of new funds by issuing new equity shares. This isn’t usually a good sign, as it waters down existing shareholders’ stake in the company.”
One company, Mike Ashley’s Frasers Group, remains positive about Asos’ prospects and has been upping its stake. The Sports Direct owner now controls a 19.3% stake and Ashley himself is now one of the largest shareholders.
Chiekrie added: “The cash injection has provided some wiggle room to execute the ongoing transformation, so we’ll be looking out for early signs that it’s bearing fruit in next week’s trading update.
“With revenue declining at double-digit rates in the third quarter, profitability rather than growth is now the order of the day at ASOS. Costs are getting stripped back too, with the group on track to hit its cost-saving target of £300m last we heard.
“These actions should stem the financial bleeding to some degree, so keeping a close eye for more guidance on where full-year profits are expected to land.”
Analyst John Stevenson at the company's house broker Peel Hunt said his sense is that ASOS is "well progressed" to meet current targets, which should see a material reduction in net debt, which peaked at around £430 million in the first half, with gross profit margins also up.
But he said Asos "may well decline to give guidance for FY24" ahead of November’s final results presentation, which "should give a better indication of early autumn trading".
Shares in Asos are up around 3.5% in the last month and are currently trading at close to 390p.