ASOS PLC (LSE:ASC), the online fashion retailer, has suffered a lot since the pandemic and 2023 but if is to improve investor sentiment, its full-year results due Wednesday 25 October must reveal something bright.
Shares are down 25% in 2023 and have fallen more than 93% since its pre-pandemic highs and the fact it’s the second most shorted stock in London, behind only peer Boohoo, is only adding fuel to the anti-e-commerce fire.
Sales slipped by 15% in the London-listed firm’s fourth quarter and with the number of active customers slipping too, Asos may not have much more time before additional shortsellers circle – or even worse it ends up suffering the same fate as Arcadia Group, Toys R Us and Wilko.
However, Asos has a plan.
Having overstocked after the pandemic boom, the e-commerce group may have underestimated just how quickly and easily shoppers would flock back to in-store once high streets reopen.
So far the plan to trim inventory quickly, in the hopes of becoming a more cash-generative business, has made solid progress, with stock down around 30% year-on-year.
Although, to shift the excess inventory the group has been forced to offer discounts, which in turn is eating away at profits.
Analysts now reckon operating profits will fall on the lower end of its £40 - £60 million target range.
There is no sign of Asos stopping with the price cuts in the near term as there is still more deadwood to clear.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown added: “How much longer until discounting the excess inventory ceases to be a drag on profit margins is a key question investors are hoping to see answered next week.”
Shares in Asos are down over 3% on Thursday, having opened trading at around 395p.