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ASOS Shares Surged 13% on Mixed Full-Year Results. What Next?

Simon Mugo trader
Updated 19 Oct 2022

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Key points:

  • ASOS shares surged 13.2% after releasing its full-year financial results.
  • Investors cheered the results that were better than expected in some areas.
  • In addition, the fashion retailer has embarked on a turnaround plan under its new CEO.

The ASOS plc (LON: ASC) share price surged 13.2% after releasing its final results for the year to 30 August 2022. The British multinational retailer reported that its revenues rose 1% to £3.94 billion from the £3.91 billion recorded in the previous financial year.

Investors cheered the upbeat revenues, given that the retailer had warned that its sales in August were lower than expected, driven by weaker demand from customers who were holding back from spending amid the uncertain economic climate.

Also read: The Best Clothing Stocks To Buy Right Now.

The retailer’s gross margins shrunk by 1.8% to 43.6% from last year’s 45.4% due to the discounts offered by the company to attract customers. As a result, the company sunk into an operating loss of £9.8 million compared to last year’s £190.1 million profit.

ASOS noted that it had a new CEO in place to lead the turnaround efforts at the firm, including addressing multiple issues, such as the slow performance in critical international markets led by the United States. The new CEO will also be tasked with revamping the company’s customer acquisition and commercial models while also streamlining the company’s supply chain.

The new CEO, Jose Antonio Ramos, has identified four key areas that need improvement over the next 12 months, including simplifying and lowering its cost profile, improving inventory management and reorienting the leadership team. He will also refresh the company’s culture while maintaining a robust and flexible balance sheet.

ASOS is also keen to reinvigorate its business to generate long-term sustainable growth for investors. As a result, the company is currently reviewing its capital allocation to identify areas that need improvement.

The firm is also expecting a non-cash stock write-off of £100m – £130m in the 2023 financial year that will help improve the flexibility of its logistics operation and lower costs.

José Antonio Ramos Calamonte, ASOS CEO, said: “ASOS is a strong business with a compelling brand, customer offer and fashion credibility, with dedicated and passionate employees… Today, I have set out a clear change agenda to strengthen ASOS over the next 12 months and reorient our business towards the future. This includes a number of decisive, short-term operational measures to simplify the business, alongside steps to unlock longer-term sustainable growth…”

*This is not investment advice.

Asos share price.

Asos share price 19-10-2022
Source: IG

The Asos share price rallied 13.24% to trade at 554.9p, rising from Tuesday’s closing price of 490.0p.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading