Online fashion retailer ASOS experienced falling revenue at the end of 2022 due to a challenging macro backdrop. The retailer also see losses in the first half of 2023.
It is very difficult to take away out-and-out positives from the ASOS update; revenue is falling, losses are expected in H1 2023, and free cash flow for full year 2023 is expected to be negative.
Nonetheless, ASOS shares surged in early trade on Thursday following their update for the four months to 31st December.
The results were not as bad as they could have been, and the company was very positive about a bounce back in H2 2023 when they foresee cash generation increasing, as well as profitability.
The ASOS cash position would be a relief for investors. The retailer said they had the availability of £430m in cash and undrawn facilities that is likely to see them through to the second half without any undertaking any drastic capital raising.
Although shares were higher on Thursday, there are concerns among analysts about the health of ASOS’ margins in the current economic environment.
“Our experts think the outlook for Asos’s sales and margin growth is going to remain pretty challenging in 2023. Especially as many of their existing customers are set to trade down to lower-cost Asos products from more expensive and higher-margin items,” said Zainab Atiyyah, Analyst at Third Bridge.
ASOS share were 14% higher at 586p at the time of writing.