Equities Update: ASOS, Associated British Foods…

ASOS says turnaround plan is on track

Adam Vettese, market analyst at investment platform eToro, says: “Financial results have not made great reading for ASOS shareholders in recent times and today once again we see revenues contracting. However this time around the outlook is much more upbeat as the firm is saying that their turnaround plan is on track to ditch the high volumes of inventory and heavy discounting in favour of a much leaner model focusing on selling more new stock at full price. On the face of it, this sounds great, but for a stock that has declined 94% since 2021 the market is going to need more convincing and shares are down this morning as a result. 

“If ASOS can pull off its turnaround and achieve the numbers it has set out then we could see shares recover over the next 12 months but it is not without its risks. The firm has refinanced much of its debt which is now at a higher rate than previously, so the stakes are high if the new model does not get sufficient traction. Lofty predictions of a 60% rise in EBITDA are just that at this stage and these need to become results if they are to start moving the needle for the beleaguered stock.”

Primark is still a hit as ABF profits jump by 32%

Mark Crouch, market analyst at investment platform eToro, says: “This is a strong set of results from Associated British Foods. With shares recently struggling to build on the strong momentum generated last year, investors may have been getting the feeling that ABF’s rally had run out of steam. However, after reporting a 32% jump in profits, those fears will have been put to rest. 

“ABF’s grocery arm, which accounts for around half of the company’s revenue, reported an increase in sales as popular brands including Twining’s tea and Kingsmill are still a hit with customers.  

“ABF’s showpiece, Primark, notched up a significant jump in operating profits as ABF’s store roll-out programme is beginning to pay off. Despite consumers tightening their belts, Primark has been largely unaffected, with shoppers still flocking to the retailer, whose value and clothing range offering remains in high demand.

“It was bittersweet however, as European sugar prices lagged in 2024, this has acted as a drag on earnings, something the company expects to improve into next year.

“Regardless, ABF’s balance sheet is strong, and the business is generating a lot of cash. So much so that after completing £600m of share buybacks, ABF bosses have pledged to extend the programme, targeting an additional £500m of share buybacks over the next twelve months.”