- ASOS
- 01 October 2024 11:09:44
Source: Sharecast
The broker reiterated a 'buy' rating, lifting its target for the shares from 490p to 600p.
"A reinforced balance sheet offers management time to continue its product and execution turnaround plan," said analyst Anne Critchlow.
"This strategy is already beginning to bring stability with a lowered and refreshed inventory position on the wholesale side and an improved cost-to-sales ratio, even in the face of top-line pressure."
The analyst pointed out that Asos's recent debt restructuring and the partial sales the Topshop brand asset into a joint venture structure have reduced net debt by around £150m, and the company should have ended the financial year to 31 August with net debt of £312m, down from £320m last year.
Meanwhile, Critchlow highlighted Asos's speed-to-market 'Test and React' sourcing model, which pushes for quicker development of garments, as an "exciting" part of its turnaround plan: "'Test and React' has now reached 10% of ASOS’s own-label sales and has enjoyed a minimal mark-down experience due to 'on the money', short-lead-time sourcing for this product."
The broker has hiked its EBITDA estimate for the year just gone to £80m, up from an earlier prediction of £38m and above the top end of company-compiled consensus.
Asos shares were up 0.2% at 429.5p by 1102 BST.