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ASOS launched in the year 2000 and the CEO is Nick Robertson. ASOS full name called as As Seen on Screen. Asos is a global online fashion retailer which runs it’s headquarter in UK, and ships their products to different regions such as Europe, U.S.A and Asia. Asos employed almost 4386 employees and sells over almost 87,000 products such as womenswear, menswear, footwear, accessories, jewellery, and beauty. Asos have their own app which can be utilised to do online orders which will be shipped to the relevant countries.
As, this is through mobile app or website link through desktop. Asos, have tailored according to customers preferences such as languages and payment methods. Asos have attracted almost 157.2m customers though the websites and have about 18.4m active customers of from there 6m are from UK and 12.4 from different international countries.
ASOS has established itself as a global fashion destination, catering to a wide audience through its diverse product range and innovative online platform.
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The company's performance over the fiscal year 2017-2018 showcases a remarkable growth trajectory, with sales surging to £2,355.2m, a 26% increase from the previous year. This growth is further underscored by a 28% rise in profit before tax and an enhancement in the retail gross margin by 130 basis points to 49.9%.
To evaluate the financial health and operational efficiency of ASOS, we calculate the percentage movement in various financial metrics from the fiscal year 2017 to 2018.
This analysis highlights ASOS's strong financial performance and its ability to enhance profitability and manage operational costs effectively.
Total Capital employed – show workings if needed
Non-Current liabilities + Equity (10.2+438.8) = 449
Non-Current liabilities + Equity (9.1+287.1) = 296.2
Financial ratios offer insights into ASOS's financial stability, efficiency, and profitability. Key ratios for the fiscal years 2017 and 2018 include:
PE Ratio can be called as multiple because it shows how much investors are willing to pay for per dollar of earnings. The following P/E ratio for the ASOS company and BOOHOO company as of 31 August 2018. The P/E ratio will be calculated accordingly by the following formula to get the (share price / earnings per share). Therefore, P/E ratio for ASOS report is at 6114 / 98.9 = 61.82 and P/E ratio for BOOHOO is at 177.00 / 2.78 = 63.67.
As seen from the above ratio there is a decrease on ASOS and increase on BOOHOO ratios which can be the company growth prospects such can be their capital structure of both company. https://myassignmenthelp.com/free-samples/managerial-finance-annual-report-and-accounts. If BOOHOO p/e ratio to be applied with ASOS company as (Boohoo P/E ratio X ASOS Earnings per share) 63.67 X 98.9 = 6297p. ASOS share price can see slight increase. As both company are doing the similar business and currently ASOS is the largest in the market compare to BOOHOO.
As based on the above graph focus on the share price which ends in the year 31 August 2018 (FY18). ASOS company was going through mid- level declines in certain months of the year even though they rose their annual sales growth was 26% and with profits growth by 28% in the full year 2018 (FY18) results.
As the wake of the Brexit vote, the company was affected by the British pound as the fashion retailer benefits from strengthens the source in the UK while the sales in Europe and US was increasing. This was downturn for ASOS because it’s will be losing part due to the exchange rate for other international countries. International countries consumers were purchasing more than UK consumers because of the exchange rate. Slowly sterling was recovered and gain slightly to gain against the US dollar and Euro currency.
ASOS Company starts to notice that they have some declines in certain months so they did some improvement in their business to hit profits such as short-term pricing, inventories, new marketing strategies to boost up. So due to that they have some quick rise even though they are down.
To invest in the asos share, need to find out the performance for the financial year 31st august 2018, downturn of sales growth, future plans and the recommendation of buying the shares.
According to the financial report for the year 2018 (FY18). The performance of Asos company for the following retail sales revenue grows at 26% to £2355.2m in the report basis and was 24% on the constant currency basis. As strong growth across the UK was 23% and the international countries was at 27%. The retails gross margin was up at 130bps. As the profit before tax is up at 28% at £102m (EBIT margin 4.2%), after it takes the accounts of substantial transition costs.
As consumers strong engagement continues as the active customers are around 19% as the average basket values at 1% and order frequency as at 7%. As total orders were placed at 63.2m, 27% year on year. As there was total of 3 hubs one was at US phase one operational and two hubs at Euro progressing well. As the cash balance of £43m reflects the working capital and capex investment, as the new £150m which is 3-year facility agreed in guidance and medium-term outlook.
Asos was been issued profit warning sales after the FY18 during the month of November which came as unexpectedly. As the trading during September and October was just in line to the expectations. As November’s performance was a cause of concern in the trading part. Even though the sales growth was 14% over the quarter but asos experienced a significant deterioration which was the important trading month of November and conditions were remain challenging for the company till now.
ASOS company it’s been reduced its expectation for the upcoming financial year 2019. The sales growth of just 15 percent compared to previous which was 26%. As the company also predicts their full year earnings margins should drop from 4 % to 2%. As this becomes worrying for the UK fashion retail industry which was seen quite largely in their pureplay online retailers like asos company.
To counter back the retail storm most of the retailers were giving in more promotions and discounts actively. As this lead to ASOS to follow by pricing discounts and promotions which reduces their profits margins. As it was material month during November as the sales and cash margins was behind the expectations. Due to economy uncertain across many of our major markets together with a weak customers confidence which led to the growth be weak in online sales clothing sales recent years. But retail sectors have recalibrated the expectation for the current year accordingly.
Asos mention that whatever it was went wrong and make the confident of an improved performance in the second half of the year with no changes in their profit for the year. As the investors for the asos company was very pleased with the news and the share price was slowly ticked up as a result. Asos comes out from the other side of its downturn of heavy investment period. Asos will now focus on its lower capex for the next financial year which can be focus back to its latest fashion provides 20 somethings fashion.
ASOS's financial analysis for the fiscal year ending 31 August 2018 showcases a company on a growth trajectory, with solid revenue increases, profitability improvements, and strategic market positioning. However, challenges such as significant deterioration in sales growth and the impact of external market conditions highlight areas for caution.
Investment in ASOS shares should be considered with a long-term perspective, taking into account the company's potential for recovery and growth, as well as the inherent risks associated with the retail and fashion industry. Potential investors should closely monitor ASOS's strategic initiatives aimed at enhancing operational efficiency, market expansion, and customer engagement to make informed investment decisions.
Financial Analysis of ASOS: A Managerial Finance Perspective. (2024, Feb 21). Retrieved from https://studymoose.com/document/financial-analysis-of-asos-a-managerial-finance-perspective
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