Liberum cuts Asos rating to 'sell'

The broker, which previously had a ‘hold’ recommendation on the AIM-listed fast fashion brand, also reduced its target price, to 500p from 700p.

It called full-year headline numbers, released on Wednesday, "disappointing", and said the elevated stock write-offs and exceptional changes - on top of net debt of £153m - "took us by surprise".

Asos swung to a full-year loss after cash-strapped customers returned more items. It has launched a number of cost-cutting measures in response, and recently-installed chief executive Jose Antonio Ramos Calamonte set out his new strategy, including a focus on shorter buying cycles, reduced stock levels and new clearance channels.

Liberum analyst Wayne Brown said: "We found the results presentation underwhelming - it left us with many questions unanswered, the strategy appeared under-baked and consequently, the management team sounded underprepared.

"We are also not overly convinced it takes just 12 months to get your customer base off the discounting drug, especially in the currently consumer environment.

"The current valuation reflects high debt, negative free cashflow, executive risk for this ‘new’ strategy and the fact we remain firmly in a downgrade cycle. We move to a ‘sell’ and lower our target price to reflect estimate cuts and a concerning lack of detail in the analyst presentation."