The ASOS plc (LON: ASC) share price surged 19.1% despite reporting a drop in revenues generated during Q4 2022 despite the busy Christmas shopping period that saw many of its competitors grow their sales.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
The fast-fashion retailer attributed its lower sales to delivery disruptions triggered by the Royal Mail postal workers' strikes, which we have covered in depth in other articles. However, the strikes affected all retailers, yet ASOS has been more impacted than others.
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The retailer’s sales in Britain, its largest market, fell from £645 million to £591 million, which the company attributed to weak consumer sentiment and delivery challenges. However, the firm maintained its gross margins at 42.9%, an impressive achievement.
ASOS grew its sales in Europe by 6%, the only region where its sales improved. Its US sales fell 2%, but the worst affected region was the rest of the world (ROW), where the company’s revenues shrunk by 31%, leading to an overall Group revenue decline of 6%.
The retailer’s CEO, Jose Antonio Ramos Calamonte, reiterated his commitment to winning back the company’s target clientele aged 20-something, which prefers the fast fashion items it sells. The company faces stiff competition from other fast-fashion retailers such as Boohoo.
ASOS shares rallied after the CEO revealed that he had identified various cost-cutting measures that could save the retailer about £300 million during its 2023 financial year. Investors were happy to hear of more cost savings as part of the turnaround plan initiated by the CEO since he took over in June 2022.
Still, the fashion and cosmetics retailer expects to incur a loss in H1 2023 before turning a profit in H2 as macroeconomic conditions improve, and consumer shopping trends normalise.
The company’s expectations align with most central bank policies, as many expect the Bank of England and other leading central banks to stop hiking rates later in H1. Some could start lowering rates in H2 2023 to boost their economies.
ASOS expects its strategy to work as it aims to attract new customers in the competitive fast-fashion industry.
*This is not investment advice.
ASOS share price chart.
The ASOS share price surged 19.09% to trade at 694.1p, rising from Wednesday’s closing price of 582.8p.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.