Liberum slashes Asos price target after results

Liberum slashed its price target on Asos on Wednesday to 500p from 700p after the online fashion retailer’s interim results.

The broker, which has a ‘sell’ rating on the stock, said the results were "well below" current market expectations, with revenue declining 10% on CCY basis, and an adjusted pre-tax loss of £87.4m versus consensus of £63m.

It noted that sales trends worsened in January to February and that this has continued into March/April.

"While plans to deliver £300m of Driving Change agenda benefits in FY23E remain on track, guidance for FY23E has been cut to a circa £29m to £9m adjusted EBIT loss (consensus £38m profit) and free cash outflow of circa £100m (bottom end of prior range of -£0 to -£100m)," it said.

Liberum said gross margin is at risk of lost sales from the new strategy and therefore risk remains of a further inventory write-off given current trading trends.

"With free cash flow expectations reduced, we still see risk that in a plausible downside scenario, the group may need to raise further cash," it added.