It’s been a difficult 12 months for ASOS (LSE: ASC) shares. A couple of weeks ago, it was relegated from the FTSE 250 index, which comes into effect from June 16. Shortly after that time, however, news emerged that the beleaguered online fashion giant had been subject of a takeover bid.
Could now be a good time for me to snap up ASOS shares and what could this takeover mean? Let’s take a closer look.
ASOS shares woes
ASOS’ share price journey does not make for pretty viewing. In fact, as I write, they’re trading for 365p, down nearly 70% over a 12-month period. At this time last year, they were trading for 1,160p.
Should you invest £1,000 in Tesla right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesla made the list?
So what’s been happening to drive down the shares so much?
Firstly, supply chain woes have hit many businesses, including ASOS, very hard. These issues have made it harder for companies to make their products readily available to their customers, which can impact demand, spend, and overall performance.
Next, the rising cost of materials, as well as generally higher costs across many aspects of the economy, have made trading conditions tougher. These higher costs are often passed onto the customer, which may drive customers towards cheaper alternatives and away from ASOS.
Finally, the cost-of-living crisis and soaring inflation has dampened consumer spending. With customers looking to stretch their budget further, perhaps luxury items such as branded clothing aren’t high on their priority list.
To make matters worse, ASOS’ most recent half year report made for concerning reading. For the six month period to 28 February, it reported revenue fell 8% year on year and it reported a loss of £291m. Furthermore, last month, it announced a £75m fundraise to repair its damaged balance sheet.
Takeover rumours and what I’m doing now
ASOS shares seemed to spike temporarily recently when the news broke a couple of weeks ago that Alibaba-backed Turkish fashion retailer Trendyol bid £1bn for it. It appears as though the approach was rebuffed.
One of Chinese giant Alibaba’s aspirations is global growth. Any successful bid could help both sides but whether any further bids arrive or anything else materialises remains to be seen.
In addition to this, ASOS has other major shareholders that could make a play for it and look to revitalise its fortunes. Frasers Group, of the FTSE 100, owned by Mike Ashley, has a history of buying failing retail businesses and turning around their fortunes.
What could a takeover look like? Well, at this time no one knows but since ASOS shares and its market-cap has diminished, it looks like a prime candidate for someone to snap it up. It has a great position in the UK fashion market with a good market share, coupled with some interesting intellectual property, such as the once-fallen Topshop brand.
Considering its recent woes, and the uncertainty around any potential takeover, I’m going to keep ASOS on my watchlist for now. I’ll be keeping a close eye on developments.
