// Analysts warn of a further hit to sales as Asos posts heavy losses
// Last week the online fashion giant posted first-half losses of £290.9 million
Asos has suffered another setback as City analysts warned of a further hit to sales just days after the retailer posted heavy losses.
Shares in the online fashion giant plunged 20.7%, to their lowest level since 2010 after JP Morgan slashed its target price on Asos stock from 1000p to 610p.
The analyst notes came after Asos posted first-half losses of £290.9 million last week, compared to a £15.8m loss the year before.
The investment bank told clients the results left investors in doubt over whether the retailer could achieve a return to profit in the next six months.
“Given the ongoing restructuring and cost savings initiatives, it is becoming increasingly evident that ASOS will need to seek further capital infusion to support its long-term viability, in our view,” said Shore Capital in a note repeating its ‘sell’ advice.
While it acknowledged Asos has made progress to cut costs, JP Morgan said the slump in sales and cost of refinancing its loan “raised questions”.
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Asos has struggled to contend with shoppers returning to brick-and-mortar stores post-pandemic as well as the cost-of-living crisis pinching shopper’s budgets, much like fellow rival Boohoo, which profits halved this week.
The company has also been hit by huge levels of returns, pledging to axe unprofitable brands as part of a wider overhaul of its business model.
But analysts at JP Morgan warned that sales could slide even further in the short term, while the ‘mid-term growth outlook for the clothing pure-play looks increasingly challenged’.
READ MORE: Can Asos cost-cut its way back to growth?
While Asos has taken “decisive actions” to elevate its financial performance, with all eyes on whether it will deliver positive outcomes in the second half, Shore Capital analyst Eleonora Dani warned that the firm’s “laser focus on immediate profitability risks stifling future growth prospects”.
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