Financial Trading Blog
Has ASOS already bottomed?
After shares plunged over 70% this year, the company is changing management. But is it enough to reverse sentiment?
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Creditors wonder where the money is
In its latest trading update, Asos said it had substantial funds available. But also, quite recently, it disclosed that it was looking into refinancing its outstanding loans. Debt has been higher than expected, one of the reasons creditors are looking to get a more in-depth look at the online retailer's finances.
Of course, fashion retailers are expected to face a challenging environment as inflation makes shoppers prefer groceries over clothes. The company itself echoed that sentiment. Asos cut its earnings guidance to the bottom end of its profit expectations of between £20-60M range.
New CEO gets chance to ease concerns
There are many expectations for tomorrow's earnings release since it's the first time the new CEO will give his vision of the future. That means there could be announcements of significant changes to the company's right side. With creditors starting to worry, the EBITDA-to-debt ratio will likely get extra focus.
Sales in the company have consistently risen for decades now, and the expectation from the company is that the current fiscal year won't be any different. So, the focus is also on efficiency objectives and translating increased revenue into profit. With the expected looming recession in the UK and the US at the start of next year, profitability guidance for the next period is likely to be pivotal.
Falling wedge signals reversal; for now
Key takeaways
Asos is looking to refinance its outstanding loans due to higher-than-expected debt. This is likely due to the challenging environment for fashion retailers, which is expected to continue. As a result, the company has cut its earnings guidance. The new CEO might announce changes to the company tomorrow, which is particularly interesting to creditors. Investors will likely focus on efficiency objectives and profitability guidance for the next period.
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