Liberum slashes Asos target price, says much left to do to meet full-year guidance
Analysts at Liberum slashed their target price for shares of Asos after the company posted weaker-than-expected sales for the first four months of its financial year.
The online fashion retailer announced a 2% rise in sales, or 5% at constant exchange rates, for the September to December period, as the latest wave of Covid-19 and supply chain disruptions dragged on sales in the European Union and US.
Despite the tough comparables with the year earlier period, when sales jumped by 23%, the firm had guided towards mid-single digit growth.
Its gross margins meanwhile shrank by 400 basis points due to clearance activity, high freight costs and increasing use of air freight.
In any case, a lot of work remained to be done to achieve its full-year guidance, the analysts said.
They also pointed out the "significant" cash burn by Asos over the last few years as it invested in technology and infrastructure, even though execution had historically been a source of disappointment.
Liberum kept its recommendation for Asos at 'hold' but cut its target price from 3,560.0p to 2,300.0p.