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Stock Watch

Will the ASOS share price stay in fashion?

ASOS share price: ASOS packages to be sent

The ASOS share price has been steadily rising as the online fashion retailer gets set to announce its half-results.

One of the big winners during lockdown, ASOS is expected to report a 22% rise in revenues. Customer numbers have doubled over the past five years, and the ASOS share price is currently sitting at 5,814p, a huge gain on the 2,110p of April 2020.

ASOS share price driven by retail success

The company had taken a battering in 2018/19, as both profits and the ASOS share price dropped, but 2020 saw the company make a strong comeback as online retail became the only game in town thanks to Covid-19.

In January, ASOS reported a 24% rise in total retail sales for the four-month period to date, with the UK market driving those gains with £554.1m, a rise of 36% from the same period a year ago. Activewear and leisurewear sales were key to the revenue growth, as customers adjusted to life in the latest lockdown.

The company was bullish on the outlook, despite higher costs as a result of Brexit. ASOS had prepared for the impact of Brexit, including adding a warehouse in Berlin to serve EU customers, but some costs will be incurred, with the retailer estimating those to be at £15m.

Acquisitions boost ASOS share price

Since then, management have been busy picking through the ruins of a devastated retail landscape, buying up well-known retail brands that had fallen by the wayside, devastated by the lack of footfall due to the pandemic.

In February the company confirmed it had acquired the brands of Topshop, Topman, Miss Selfridge and HIIT brands, fully funded from cash reserves. As Sir Philip Green’s Arcadia empire collapsed, ASOS swept up the brands for £330m - £265m for the brands and £65m for current and future stock. The deal didn’t include any of Arcadia’s stores, warehouses or distribution centres.

ASOS CEO Nick Beighton was “extremely proud” to have acquired the brands: “The acquisition of these iconic British brands is a hugely exciting moment for ASOS and our customers, and will help accelerate our multi-brand platform strategy.”

The acquisition of several of its bricks-and-mortar rivals may mitigate the impact on online shopping that is expected when the UK government’s roadmap out of lockdown continues with the opening of non-essential shops on 12 April. This has helped keep the ASOS share price on an upward trajectory in 2021.

Further costs included the acquisition of £30m of stock to support initial trading as the brands get migrated into the brands product cycle. There was also a £20m one-off integration cost, which could be added to January’s guidance upgrade which saw that increased to £190m, when the company said it was accelerating its US strategy with its partnership with US department store Nordstrom.

ASOS will reveal its half-year results on Thursday 8 April. What will the numbers mean for the ASOS share price?

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