Aug 30, 2019

Asos faces tough job of rebuilding relations in the City

The job of rebuilding relations in the City is only just beginning after a year marked by profit warnings. London-based Gladstone Capital Management, founded by George Michelakis, has been shorting Asos shares since last year and has a 1.3 per cent bet against the stock. Ben Hunt at Investec points out that the growing prevalence of third-party brands on the Asos website, such as Topshop from next month, will dilute profitability, since they carry lower margins than its own Asos Design range. Asos says the margin erosion is outweighed by the greater "Share of wallet" that a wider range brings, and that its marketing is re-engaging customers. Many still agree; Sherri Malek at RBC believes that if Asos achieves even a third of its UK market penetration in the US and Europe, it could triple its £2.4bn annual sales in 10 years.

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