Barclays downgrades Asos to ‘underweight’

Barclays said that over the past three months, it felt that the biggest driver of Asos’s equity story was around its ability to refinance.

"The Topshop transaction/re-fi is now done and removes some of the equity overhang/balance sheet risk into FY26. Our balance sheet analysis suggests that there is FY27/28 debt that could need refinancing, meaning earnings/FCF delivery in the mid-term is important," it said.

Barclays said the outlook remains challenged from a competitive standpoint - e.g. from Shein/Temu/Vinted - and sees a risk to consensus numbers both in FY25 and into the mid-term.

The bank said its slightly lower forecasts are now 22%/15% below Bloomberg consensus adjusted EBITDA for FY25/26, respectively.

"Additionally, with higher interest costs post re-fi and adjusting for royalty payments to the JV, we are now not forecasting positive FCF/earnings per share until FY27, which makes valuation more challenging, in our view.

"With the positive catalyst of the re-fi now played out, we think the focus shifts to Asos's fundamentals, and we view the risk/reward as skewed to the downside."

Amongst other commerce platforms in its EU Internet coverage, Barclays said it prefer names that have positive and accelerating growth with well-capitalised balance sheets and EPS/FCF valuation support in 2026, such as Deliveroo, which it rates at ‘overweight’.

"We see Asos as a relative UW on that basis," it said.

At 1300 BST, Asos shares were down 3.8% at 418.80p.