Consumer Discretionary
Management exodus continues - ASC’s interim CFO is the latest to go. The lack of internal controls brings into question the firm’s ability to work through their long to-do list (growth outside UK, brand partnership expansion, extending target audience, stretching wallet share and its Partner Program roll out) and near-term challenges (cash, management, etc.). In their previous report, 'Online Fashion: Predator or Prey?', Arete cut their TP to 200p (from 300p) - believes ASC could end up facing a stark choice between a set of acquirers, possibly Zalando or PE, before seeing its equity being wiped out by rising costs / debt burdens.
Edition: 150
- 09 December, 2022
Consumer Discretionary
Arete has changed ASOS to a 'Sell' rating from 'Neutral' in the face of (i) Lack of seasoned management, (ii) Tough UK/EU retail environment, and (iii) Debt burden (net debt of £150m), leaving its lengthy to-do list on hold. The company will soon start waving the white flag trying to be an acquisition target. Huge shift in the sector as online fashion went from “overweight all” to selective stock-picking, sparking strategic M&A and requiring platform investments through the recession for those which can sustain them.
Edition: 145
- 30 September, 2022
Consumer Discretionary
Ready for a reboot - while a new (preferably tech-experienced) CEO will have much to do, Arete sees an opportunity in the roll-out of ASC’s recently announced partner programme initiative. The online retailer must also step up capex materially to enhance its proposition in international markets, potentially cutting ties with RoW/ANZ. Alternatively, it may retreat to its core UK stronghold, ultimately leading to a merger with a larger rival. The stock is cheap on a 0.5x 2022E EV/GMV multiple (50%+ discount to peers) hence risk reward looks favourable here. Upgrades to Buy. TP £32.40 (45% upside).
Edition: 126
- 07 January, 2022
Boohoo (BOO LN) UK
Consumer Discretionary
Same share price as last year, but now offers an even better risk:reward - BOO has gone from having just four brands to thirteen, has trebled in size, wields enormous social media influence and pivoted its product offering on a sixpence during Covid. It not only has the platform, but also the desire, hunger and ability to buy failing brands and consolidate them all online. The fact that Next and ASOS have recently started to pivot in this direction is notable - are they threatened by the opportunity BOO has created for itself…?
Edition: 112
- 11 June, 2021