ASOS PLC (LSE:ASC) has received a damning review from Liberum, which noted time was ticking for the fashion retailer to improve cash generation.
Some £500 million worth of convertibles are due for repayment in 2026, analysts from the bank highlighted in a note, potentially prompting a liquidity event.
“The cost base and working capital have been rightsized but without returning to meaningful sales growth, free cash flow generation will not improve materially,” analysts said.
“ASOS probably has another 12 months to fix free cash flow generation before it must start thinking about refinancing [or] paying the convertible due in less than 24 months.”
Sales fell 18% over the half year to March, while adjusted pre-tax losses increased by 40% to £120 million, ASOS reported last month.
A £21.1 million free cash outflow was also reported, against £12.7 million a year earlier.
“We struggle to see a quick turnaround of the ongoing sales decline at ASOS,” Liberum added, highlighting a “risk of further shareholder dilution [or] sale of key assets”.
Liberum lowered its ASOS share price target from 360p to 300p, against Tuesday’s closing price of 356.8p, while a ‘sell’ rating was reiterated.