In major news on UK stocks, ASOS PLC’s (GB:ASC) shares opened higher despite the company reporting an 18% drop in its sales for the first half of FY24. The market responded positively, as the sales decline was in line with the company’s guidance. The company also stated that it was on track to meet its full-year guidance, including a 5%-15% decline in sales, achieving positive adjusted EBITDA, and restoring its inventory to pre-COVID levels. Shares gained over 5% on Tuesday as of writing.
ASOS is a prominent British online retail brand known for its diverse selection of clothing, footwear, and cosmetics.
ASC’s Struggling Share Price
ASC stock is down by over 50% in the last 12 months. The stock has had a shaky last few years after soaring to new heights during the pandemic in 2021 and then plummeting after the company’s sales declined following the reopening of the economy. Moreover, the economic downturn, coupled with operational challenges, significantly impacted the company’s profits and share performance.
Consequently, ASOS initiated a turnaround plan aimed at revitalizing its operations and the share price.
Insights from ASOS’ Trading Update
ASOS stated that trends observed in FY23 persisted through the first half of FY24, as it continued to implement actions aimed at improving core profitability while focusing on optimizing stock levels. The company’s stock levels decreased by 30% in the first half.
For the 26-week period that ended on March 3, 2024, the company’s free cash flow increased by £240 million over the first half of FY23. This was mainly driven by stock clearance and improved underlying profitability. The company also reported a free cash outflow of £20 million, marking its strongest first-half cash performance since FY17. ASOS ended its first half with a cash balance of over £330 million, which is £20 million above the previous year’s corresponding period.
The company will announce its first-half results for FY24 on April 10.
Is ASOS a Buy or Sell?
On TipRanks, ASC stock has received a Hold consensus rating based on one Buy and three Hold recommendations. The ASOS share price target is 448.75p, which is 30% above the current trading levels.
