Asos PLC rose 3.1% after reports that it is exploring a sale of the Topshop brand it bought from Sir Philip Green's collapsed retail empire less than three years ago.
Sky News said the online retailer, which will publish its delayed full-year results this week, is at the early stages of a process that could see it offload what was once one of the best-known names on the high street.
But Shore Capital analyst Eleonora Dani said while the sale could offer Asos “a financial lifeline,” these developments raise questions about the firm’s long-term viability.
Dani explained Topshop had been a key growth driver for Asos since its acquisition and selling it now could severely impede the company’s recovery efforts.
With the brand's assets currently valued at £219 million in Asos’s latest annual report, the sale could add to the loss on the P&L, she suggested.
Compounding these concerns are other red flags at Asos.
The company recently delayed its full-year results by a week, a move that, when considered in isolation, may not have attracted significant scrutiny, Dani said.
But, coupled with Frasers reducing its stake from 23% to 19%, "these developments cast a shadow over the retailer's going concern," in Dani’s view.
The potential sale of Topshop and Frasers Group's reduced stake paints a picture of a company “at a crossroads, facing both operational and financial challenges,” Dani added.