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Apologies if already posted.
https://www.ft.com/content/82d79450-6d3c-4d6b-9ddb-99f2f3e41527
Thanks for posting.
For those that can't get behind the paywall:
California-based hedge fund Camelot Capital Partners snapped up more than 360,000 Asos shares this month in a pair of share dealings worth more than £1.25mn. Camelot’s founder and chief executive, William Barker, has served as a non-executive director of the fast fashion group since September.
Prior to his formal appointment, Barker’s vehicle already owned around 14 per cent of Asos’s issued share capital. This month’s purchases take the fund’s holding closer to 15 per cent. Asos has been struggling to reduce both its debt burden and excess inventory in recent years and its share price has fallen by around 50 per cent over the past 12 months.
Founded by a then 24-year-old Barker in 2013, Camelot manages a Cayman Islands-domiciled “value oriented” hedge fund known as the Barker Partnership. Shortly after its incorporation, Barker told the IC that the fund would be “my 50-year investment vehicle”.
According to information compiled by FactSet, Camelot initially took a 3 per cent position in Asos in early 2019. The fund’s single-largest holding is in US-based online used car dealer Carvana but it also owns more than 20 per cent of electrical goods retailer AO World and a 5 per cent stake in Asos’s major rival Boohoo.
Barker’s recent share purchase is bound to be interpreted as a sign of his faith in Asos’s prospects of recovery. While that may seem like a distant prospect, there are signs things are moving in the right direction.
At the end of the first half, Asos had £593mn of unsold merchandise on its books, ahead of its full-year objective of £600mn. The company is also working to bring stock into the business on reduced lead times, thereby enabling smaller purchase orders.
Good stuff cheers :)
It's a matter of time...
The market just needs to believe the turnaround is occuring. Once the belief is there everyone will be clamouring on board if the SP is still this low. Co inciding with potential rate cuts should provide some big tailwinds.
The BOD just need to hit FY guidance then hit revenue growth along with EBITDA margin recovery and away we go I'd say.. great recovery play, plenty of green shoots seen both in the macro and at company level.
The media will flip soon enough, they just focus on the now and the past not what the BOD are guiding for.
Agreed Sj, it seems pretty obvious to us.
The SP will move north when everyone's onside and pretty damn quick.
Following the last months update, I think the CEO has a steeper hill to climb than anticipated. ASOS admits it needs at least until 2025 to return to a growth in sales and a positive pre-tax profit. On previous experience, that probably means 2026 then, where more hurdles linger such as the bond renewal. Debt is the major issue. As people know, I have doubts as to his ability and fear that cash could become tight between now and the promised turnaround of 2025. Why else would it explore a potential sale of its Topshop brand? While a sale would solve a short-term financial dilemma for the company, it would send bad vibes to ASOS shareholders. Selling off assets when predators know you are in dire need for cash will see potential buyers exploit the weakness.
Alternatively, will someone eventually bid for ASOS? I think this is fairly likely. This company would benefit from a single strong owner controlling things, radical changes implemented outside the public eye, and a strong balance sheet as well as retail expertise backing management. However, without the likes of MA, Povlsen or Next getting too involved, I continue to see ASOS as a crisis-ridden company that may have to go cap in hand again to capital markets. Shareholders would face further dilution. Meanwhile I believe Povlsen, a silent partner, is there for the long term (famous last words lol). He's had loyalty to the brand for such a long time. Barker also tends to play long but I think in this case, he and MA are in it to make money somewhat more quickly. Barker is investing his clients money and MA is purely an opportunist who sees this as a two way win. So many people say that Mike Ashley is a man without a strategy who places random punts on stocks. Yeah right, just look at Frasers, awash with cash with fingers in so many pies. Yes he likes a punt, but they are always measured and hedged. Meanwhile, with declared shorts still hovering between 5.5 and 6.5 , the SP ain't going anywhere soon, unless someone pounces. It is only this factor which is propping up the SP.
*I think the CEO has a steeper hill to climb than anticipated.*
Why? They report being ahead of schedule - in several metrics, but most notably cash generation and inventory reduction. Perhaps you could explain your reasoning further?
*On previous experience, that probably means 2026*
Again, can you put some meat on the bones here? Why should it take an extra year - particularly, given the improving macro situation.
Agree, re net debt but that has also been reducing albeit slightly:
From the update:
£m
Six months to 28 February 2023 - net debt: £431.7
26 weeks to 3 March 2024 - net debt: £348.8
This partly seems to be down to a reduction in the Bantry RCF, which can only be a good thing.
Re Top Shop, obviously they're going to listen to offers and proposals, but these have clearly been rejected. So, this suggests that there is no immediate need to conduct a fire sale of such assets.
Agree, re the share price . I don't, however, see it being propped up by the prospect of a bid. ASOS, is priced to fail already - It's possible that the hedge funds might manage to get it down to £3.00, but I would be amazed if it didn't bounce quite hard from there.
Re the bid prospects. I agree, it's fairly likely - in fact we know it's already happened back in Dec 2023 and in my view since then. But I don't see a bid being entertained at this stage. And unless it is over £10 (which is highly unlikely currently), I don't want it to be. In my view, this about to turn. Barker knows this, Frasers know this, and Anders likely does too. Why sell now for a ridiculous price? I suppose there is a remote danger that it could be taken private in a deal that is poor for PIs. That's a risk we have to take I suppose.
I have to say Simon, if I felt the way you seem to about the trajectory of ASOS, I would sell immediately. Not advice, of course, but I would never hold in a company that I personally believed was in such a dire situation.
I wish you and everybody here luck, however.
DYOR/GLA
No mention of any tie up with India - not heard much about that for a while
Does anyone know if it is still a runner...
Maybe Simon is an updated bot from Roberto Carlos.. bit like terminator. Simon can string a sentence together so he's like a modern boy and Roberto is just an old run around. I wouldnt be holding aswell if i felt the same.. so far Jose has done what he said he was going to. He now guides for growth from next month onwards.. :)
Haha
Funny because right now I’m watching Humans on Netflix.
Not quite sure what Simon’s (T1000) game is, but generally the points made are worth responding to …unlike Roberto’s (T800) efforts.
My biggest concern right now with regards hitting guidance is the weather. We've had 2 days of decent weather and now forecast for rain for the next seven days.
Good point Nate.
Weather has been a great challenge in retail for sometime now. I’m sure they have now learnt some lessons on how to tackle this than just playing blind and ordering based on previous/historical tactical play.
Certainly a leaner and slimmer stock pile with a quick order turn around ability will help. Of course we are approaching vacation period soon so holiday makers will be buying their outfits.
No idea who Madelaine Argy is but good to see ASOS advertising on London Bus Shelters. Hadn’t seen any adverts in a while.
KBYK...I haven't any game as such, other than to strike a balance on here and put a lid on some of the over-optimistic one-liners...you know, 'up to £15 by Xmas' types. Positivity is great but let's not over do it.
The CEO has presided over a difficult period and it would be fair to say quite a lot has been self inflicted. In my view he has that steeper hill to climb now due to factors I've already raised but which are not seemingly going away. Of course I'm merely guessing and interpreting the figures last time round. We have high debt, a lot at high interest (rates that may stay relatively high ftb), slim margins due to selling stale stock, inventory still too high which in my opinion will result in another write down at some point (no doubt it's been easier to get rid of the better stuff, but what about less fashionable items; as they say 'fast fashion simply goes out of fashion fast'), declining sales particularly in the USA, ever-increasing competition...Shein haven't touched the surface yet, I could go on. So , the question I ask myself is ''is cutting costs and clearing inventory at virtually zero profit, sufficient to return to profit?''. Very unlikely. Asos has got into this position largely via bad management and now some of the same are trying to rectify the situation.
Regarding my comment about 2026 being more likely to see a profit , if we're lucky, is associated with my above comments. Also when Calamonte says we won't see a pre-tax profit until ''at least 2025'', I obviously fear the worst. This is him being his usual hopeful optimistic self. the market doesn't seem to be buying it. On that basis I say 2026, altough then they have to contend with the bond issue.
Asos has got itself in a muddle, largely through lacking focus. Fast evolving consumer behaviour has previously outpaced Asos' ability to adapt. Others have bet right and have moved forwards to hybrid models such as H&M, Next, Frasers, and Zara. They're ahead of the game. MA knows online has a huge part to play but physical presence is also a part of it. An omnichannel service. Topman is currently wasted as a pure online play.
I know all this sounds doom and gloom but the company has at last recognised the need to be more agile and responsive. Despite the huge challenges, I can just about see glimpses of a turnaround, which is which is why I guess MA and Barker are in the fray. For me, I just want my money back which means the price more than doubling. I will not sell at the bottom. That invariably is a wrong move. With a reasonable chance of a momentum setting in or a bid, I'm sticking with it notwithstanding the risks. My main concern is a poor summer, and a cash call in the autumn!
@Simon From memory, you have the same average as myself, circa 600p.
'When' (positive vibes)we hit 600p again would you escape this stock or would you see a rise to 600p a positive sign, thus blazing the trail to recovery and hold on for say over £10?
You make some good points and I do agree that it is partly down to management's fault.
I do think 11% inflation has played a big part too.
Even if inventory levels were kept at reasonable levels and management had done everything right, I don't think the picture would of been that much different as people have simply cut back as their money dried up.
Jamesss....If I were to see the stock rising to £6 of its own volition and without approaches I would, on balance, be likely to retain the shares as it would already indicate a turning point in consumer confidence and in the company's fortunes and demonstrate ongoing momentum. However, if the shares got above £6 by way of a bid (that's a 75% premium on today's SP), I would seriously be considering an exit, (unless a 2 or 3 way auction emerged). A takeover requires reorganisation and a fair amount of time to consolidate and see the fruits, and I'm not sure if I have the patience any more. I've been encouraged by Barker's purchasing , but of course, it's not actually his own personal money (rather a long-term value orientated hedge fund) although he is paid to make money for his investors and is now a non-exec director. As I've said, at the moment, the market generally is not buying the enthusiasm of the CEO as evidenced by the shorts and current SP. My average is circa £7.30
My average is 5 and not worried, my thesis is that once this sideways SP wakes up it will move very fast as the longer it sleeps the more power it has. Two things do matter now imho, 1 proof of turnaround working and 2 positive macro and investor sentiment. The first one is going slowly but with the 3 elephants adding I am confident this is a strong signal to justify joining them (they have more skills, expertise) in this trainride, the second one I am rather optimistic about a bull sentiment with a potentially fast up scenario this year especially in US stocks. This might benefit ASOS.
BId. Have no clue if a bid is realistic and see this as nice to have. Asos is not a long term investment for me. Purely in it for turnaround and realise this has risks but you need to buy this when nobody seems to like it. Regarding Shein, no way I would ever invest a penny in that business.
Thanks for your feedback Simon.
I too would not be exiting if the SP was to naturally breakout north of here.Once we start moving I think you will see an influx of retail investors jump aboard just as the macros reduce further.
As for a takeover situation, yes I agree, it completely depends on the situation, the sum offered and potential counter offers by third parties.
Yes, thanks Simon for the respond to my previous queries with your post.
Appreciate the engagement.
KBYK