Asos shares slump after Barnsley-based retailer confirms lender talks over financing

Fashion retailer Asos employs thousands of people at its giant warehouse in Barnsley where all of its products are sent for processing before being sent out for delivery to British customers.

The online retail firm told shareholders it is “in the final stages” of agreeing to an amendment to its financial covenants for its revolving credit facility.

Asos said the move will give it “increased financial flexibility” amid an uncertain economic backdrop.

The company added: “Asos retains a strong liquidity position and this is a prudent step in the current environment.”

Sky News reported over the weekend that Asos had recently approached its banks, including HSBC, Barclays and Lloyds, to seek alterations to its borrowing agreements on the facility, which matures in 2024.

The lenders have reportedly lined up specialists from AlixPartners and law firm Clifford Chance to advise them over the process.

It comes two days before the e-commerce firm is set to reveal its trading figures for the past year to August.

Last month, Asos revealed that profitability would be towards to bottom of targets after sales fell below expectations in August amid clear signs customers were tightening their belts.

Shares were down 11.5 per cent at 470.16p on Monday morning.

The latest fall in Asos’ stock means the company has seen its share value fall by almost 80 per cent, or around £1.8 billion, since the start of the year.

The group is among online retailers to have seen recent strong growth ebb away in 2022 as rampant inflation has caused many shoppers to reassess their spending.

Rivals including Next and Boohoo have cut their trading guidance in recent weeks as a result of waning confidence.

Early last month, Asos also cautioned over profitability after sales fell below expectations in August amid clear signs customers were tightening their belts.

Investors will be hoping for a resilient outlook from the fashion firm on Wednesday when it unveils its full-year results.

Asos, which owns brands including Topshop, is expected to report adjusted pre-tax profits close to £20 million for the year to August 31.

Last month, the group said it was witnessing “the impact of accelerating inflationary pressures on consumers and a slow start to Autumn/Winter shopping” after a positive summer.

Rival Next highlighted earlier this month that its own performance rebounded somewhat in September amid back-to-school sales, and Asos shareholders will be hoping for a similar story.

Nevertheless, analysts have highlighted that the current economic backdrop continues to pose an uncertain outlook for Asos.

“It’s difficult to imagine that trend reversed given the macro environment has only deteriorated since then,” said Laura Hoy, ESG and equity analyst at Hargreaves Lansdown.

“That doesn’t bode well for the group given return rates were also on the rise.

“It would be good to get an update on how the group’s dealing with the excess stock that comes along with elevated returns—to much discounting could damage brand power and set the tone for margin erosion in the longer-term.”

New chief executive officer Jose Antonio Ramos will have a significant challenge to spark significant growth given the economic climate, particularly amid continued rises in costs.