The past two years have been a bumpy ride for ecommerce retailer Asos (ASC). Its share price shot up 70 per cent from its pre-pandemic level when people were in lockdown at home. However, when rising shipping costs started to kick in during the middle of 2021, profit margins started to shrink. Revenue growth has now also slowed against tough comparators and the share price has dropped below where it was before Covid-19 arrived in the UK.
In the four months to the end of 2021, the gross margins fell 400 basis points to 43 per cent because Asos needed to sell slow-moving summer clothes. Air freight has been needed, which is even more expensive than regular shipping costs, which are still around five times higher than pre-pandemic levels.
UK sales performed ahead of expectations, growing 13 per cent, and US sales were up a promising 11 per cent. The company sees the US as a potential saviour and has agreed to launch its brands through US retail business Nordstrom. Headwinds to expansion are coming, though. Energy prices are set to increase by over 50 per cent in the UK.
Asos co-founder Nick Robertson has decided that now is the right time to sell £10mn-worth of shares. Asos’s problems aren’t unique – Amazon (US:AMZN) is having issues in the US and online home appliance retailer AO World (AO.) issued a profit warning at the end of last year. These problems might drag on.
However, the silver linings are that top-line growth has continued and analysts expect it to increase 8 per cent in 2022 to £4.32bn. Asos also has a well-established brand, valued at $2.8bn (£2.1bn) by consultancy Kantar, making it the world’s 10th most valuable apparel name.
On Kantar’s metric, Asos’s brand is more valuable than the whole business, which has a current market cap of £2bn. Cost inflation may stick around for a while, but brand recognition is elusive and expensive to build. This could be a case of holding on until some blue skies emerge. Unfortunately, it might be quite a long wait.
| Buys | ||||
| Company | Director/PDMR | Date | Price (p) | Aggregate value (£) |
| Chaarat Gold | Martin Andersson (ch)* | 27-28 Jan 22 | 19 | 135,070 |
| Chapel Down | Samantha Wren* | 01 Feb 22 | 43 | 340,000 |
| Dr. Martens | Robyn Perriss | 31 Jan 22 | 303 | 45,450 |
| D4t4 Solutions | Ash Mehta (cfo) | 31 Jan 22 | 290 | 26,100 |
| Euromoney Institutional Investor | Leslie Van de Walle (ch)* | 01 Feb 22 | 928 | 46,400 |
| Future | Zillah Byng-Thorne (ce) | 03 Feb 22 | 3142 | 233,393 |
| Hibernia REIT | Fergal O Dwyer | 28 Jan 22 | 1 | 42,747 |
| Holywood Bowl | Ivan Schofield | 31 Jan 22 | 254 | 30,480 |
| Hummingbird Resources | Daniel Betts (ce) | 03 Feb 22 | 13 | 24,475 |
| IG Group | Matthew Brief (PDMR) | 28 Jan 22 | 783 | 97,875 |
| Industrials REIT | Richard Smith | 02 Feb 22 | 193 | 28,875 |
| IQE | Victoria Hull | 03 Feb 22 | 32 | 75,000 |
| IQGeo | Max Royde* | 28 Jan 22 | 132 | 59,292 |
| JTC | Jonathan Jennings (PDMR)* | 25-27 Jan 22 | 737 | 39,954 |
| K3 Business Technology | Oliver Rupert Andrew Scott* | 28 Jan 22 | 156 | 33,520 |
| Kingswood | David Hudd (ch) | 01 Feb 22 | 25 | 37,500 |
| Literacy Capital | Christopher Sellers (PDMR) | 02 Feb 22 | 308 | 138,600 |
| Litigation Capital Management | Mary Gangemi (cfo) | 28 Jan 22 | 91 | 24,915 |
| NCC | Julie Chakraverty | 02-03 Feb 22 | 190 | 38,493 |
| Polar Capital | Win Robbins | 01 Feb 22 | 637 | 63,673 |
| PureTech Health | Bharatt Chowrira (PDMR) | 03 Feb 22 | 255 | 51,000 |
| Ryanair | Howard Millar | 02 Feb 22 | 142 † | 460,340 † |
| SThree | Andrew Beach (cfo) | 31 Jan 22 | 466 | 29,996 |
| SThree | James Bilefield (ch) | 31 Jan 22 | 468 | 23,383 |
| SThree | Timo Lehne (ce) | 31 Jan 22 | 479 | 26,832 |
| UK Commercial Property REIT | Ken McCullagh | 04 Feb 22 | 84 | 25,139 |
| Zenith Energy | Andrea Cattaneo (ceo) | 31 Jan 22 | 1 | 321,995 |
| Sells | ||||
| Company | Director/PDMR | Date | Price (p) | Aggregate value (£) |
| ASOS | Nick Robertson | 27-31 Jan 22 | 2227 | 9,984,713 |
| JTC | Michael Halloran (PDMR) | 26 Jan 22 | 743 | 222,900 |
| Telefon AB Ericsson | Nunzio Mirtillo (PDMR) | 31 Jan 22 | 912 † | 456,115 † |
| Tesco | Matthew Simister (PDMR) | 01 Feb 22 | 299 | 59,838 |
| Wizz Air | Jozsef Varadi (ce)* | 31 Jan 22 | 4055 | 4,055,000 |
| Virgin Money | Mark Thundercliffe (PDMR) | 01 Feb 22 | 191 | 156,292 |
| *Spouse/Family/Close Associate. ** Placing / Open Offer † Converted from € / $ / C$ / ZAR | ||||
