Jefferies lowers Asos to 'hold'

Analysts at Jefferies downgraded fast fashion retailer Asos to 'hold' on Thursday, stating "the slog continues" for the group.

Jefferies cut its full-year 2022 pre-tax profit estimates towards the low end of company guidance and said it expects to see "muted growth" continue into the 2023 trading year.

"With 'normalisation' being pushed ever-further out and macro headwinds likely to worsen, we move from 'buy' to 'hold'," said Jefferies, which also slashed its target price on the stock from 2,440.0p to 775.0p.

Jefferies said it remains "sympathetic" to pressures facing online retailers, but thinks that the key factors will ultimately normalise, or at least return a long way towards historical levels.

"Indeed, we have been positive on Asos for this reason, seeing scope for ongoing margin accretion, and looking to the longer-term fundamentals over the near-term headwinds," said the analysts.

"However, the envisaged time-frame seems to be elongating by the quarter, greater macro pressures have emerged, and (as noted) Asos also has company-specific challenges with which to deal."

While Jefferies stated it continues to believe in the normalisation trade, it said it was less convinced that now was the right time, nor that Asos was the right company, to play it.

Reporting by Iain Gilbert at Sharecast.com