Burrowing Asos
Asos shares plummet amidst loan covenant renegotiation talks
Troubled fast-fashion retailer faces uncertain future
Shares in the fast-fashion firm Asos have plunged after it confirmed it is in talks with lenders over changing the terms of a £350m ($394 million) borrowing facility to give it more financial flexibility.
The company’s shares fell by more than 10% in early trading on Monday, wiping £160m off its market value. Asos said it was in discussions with its lenders to amend the terms of the facility, which was put in place in April 2021.
The move comes as Asos faces a number of challenges, including rising costs, supply chain disruption and increased competition. The company has also been hit by the cost of living crisis, which has led to consumers cutting back on non-essential spending.
Asos said it was “confident” that it could reach an agreement with its lenders that would “provide the necessary financial flexibility to support the business through the current challenging period”.
However, analysts have warned that the company could face a difficult future if it is unable to improve its profitability. Peel Hunt analyst John Stevenson said: “Asos is in a very challenging position. The cost of living crisis is having a major impact on consumer spending, and the company is also facing increased competition from other online retailers.”
Asos is one of a number of UK retailers that have been struggling in recent years. In May, department store chain Debenhams collapsed into administration, while fashion chain Oasis and Warehouse went into administration in April.
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