- Expects adjusted EBITDA of more than £34 million
- Success of Test & React model
- Continued cost discipline
Shares in ASOS (ASC) soared over 24% to 317p in morning trading as the online fast-fashion firm said it expects ‘significant improvement in profitability’ in the first half of the year despite ‘continued volume deleverage.’
On Wednesday (19 March) Danish billionaire Anders Holch Povlsen, the company's largest shareholder, increased his shareholding to just over 28%, raising speculation he could be mounting a takeover.
Under UK stock exchange rules, a compulsory offer to all shareholders is triggered when a shareholder owns 30% or more of the shares.
ASOS’ share price gains this morning are a far cry from the 52-week low of 223.20p reached on 19 March.
The company expects adjusted EBITDA (earnings before interest, taxation, depreciation, and amortisation) to be ahead of consensus expectations which sit at £34 million.
ASOS said in a brief trading update that own brand full price sales returned to growth in the first half (a core part of its customer proposition) because of its market-leading ‘Test & React’ model.
The ‘Test & React’ model is when a retailer will buy shallow and test how consumers react to the product with a view to reordering large amounts.
ASOS will announce its first half results on 24 April
ROAD TO RECOVERY
Russ Mould, investment director at AJ Bell said: ‘After a dreadful start to 2025 for the share price, ASOS was primed for a relief rally if it could offer any sort of positive news with its latest trading update.
‘Fortunately for shareholders it has delivered on this front. While volumes remain under some pressure, the big focus for the business has been on improving profitability and here there has been tangible progress, with inventory reduced and an increase in full-priced sales helping to push earnings ahead of forecasts.
‘The company has found post-pandemic life extremely difficult. During lockdown it enjoyed a boom. Bricks and mortar rivals were not available, people had money to spend and not a lot else to spend it on and few shoppers bothered to return items given the added hassle.
‘The inflationary pressures which followed Covid put many of these supportive trends into reverse. Today’s numbers represent an important first step on a long road to recovery, but the market will want to see some evidence eventually that metrics like active customers and orders are picking up when the company reports its first-half numbers in April to have real confidence in an ASOS turnaround.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
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