Asos could be hit hard by coming lockdown measures, experts warn

Asos could be hit hard by the second wave of coronavirus lockdowns in the UK, potentially seeing its monumental share price growth reverse, according to experts.

The online fashion giant has seen its share price grow by 37.9 per cent this year, aided by whopping 329 per cent rise in pre-tax profits and 19 per cent boost in sales during the pandemic.

Despite its period of rapid growth and subsequent popularity among investors, some have warned that its target market will soon be disproportionately affected by looming lockdown measures, spelling trouble for its margins.

“With the second wave of the UK epidemic building, and its 20-oddsomething customer base probably, on the whole, unlikely to suffer more serious health problems from the virus, the knock-on effects of the pandemic on the whole economy certainly could hit them hard,” Fidelity’s associate director of personal investing Emma-Lou Montgomery told Investment Week.

“After all, it is largely 20-somethings who work in retail, pubs and bars and on whom the zero hours gig economy relies. If these jobs start to go, then the likes of Asos and others which cater for their consumer needs, will start to feel the knock-on effects themselves.

READ MORE: Asos would dominate the UK highstreet if it was to compete with physical fashion rivals

“Out of work, locked-down 20-odd-year-olds are not going to spend, even on cost-conscious fashion if they are down in the dumps and out of pocket.”

She added that costs are also being forced up due to reduced freight capacity, and that Asos’ once popular “going out” range will suffer at the hands of increased demand for casualwear.

Etoro’s analyst Adam Vettese also warned that evidence suggested it is “those in their 20s – Asos’ target demographic – who are most likely to lose their jobs” and that this could cause the retailer to “suffer further down the line”.

While there are undoubtedly challenges in the coming months for Asos, The Share Centre’s analyst Joe Healey believes that Asos has proven its ability to adapt to adverse circumstances already this year.

He said: “With the share price nearing its 52-week high, investors may be cautious in terms of the amount of uncertainty we are still yet to face, but there is no question that ASOS has managed the pandemic well and performed resiliently.”

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