Shares in Asos jumped after it said it would move to the main market of the London Stock Exchange following 20 years on Aim, as the online clothes retailer seeks to pull in new investors.
Asos floated on Aim in 2001 and is one of the junior market’s biggest companies, with an equity value of £2.2bn. But its share price has been under pressure over the past year and chief executive Nick Beighton announced his departure after a profit warning in October.
Mat Dunn, chief operating officer, said: “The time is now right to move to the main market as we focus on delivering our medium-term guidance and longer-term growth ambitions.”
The move by the end of next month “definitely opens up the pool of investors”, Dunn said. Shares were up more than 10 per cent in early trading.
Online retailers like Asos and Boohoo enjoyed a surge in sales in the early stages of the pandemic while store-based rivals like Primark, H&M and Zara remained closed.
But increasing freight costs and logistical challenges have hit profits. Asos said demand had been “volatile” in the four months to December 31 as a result of Covid but total sales rose 5 per cent, in line with guidance.
Despite sales growth over Christmas, Asos said gross margins fell 400 basis points to 43 per cent, as it cleared slow-moving stock, faced elevated transport costs and resorted to air freight to tackle supply constraints
Increased costs for warehousing, labour and freight has led to low to mid-single digit price increases across Asos’s portfolio, Dunn said.
Dunn said that demand was more “stable”, however, adding: “consumers are learning to live their lives in the face of the virus”. He also expects supply challenges to ease slightly now that the peak Christmas period has passed.
A slight recovery in demand for partywear over Christmas led to 13 per cent growth in the UK. In the US, Asos had 11 per cent growth but said that port congestion and supply chain disruption had limited the company’s ability to fully meet demand.
The Topshop brands, which Asos acquired from Arcadia in February 2021, had performed well, it said.
Dunn said that Asos had enjoyed a “robust” start to the year, despite challenging market conditions.
Asos maintained its guidance for the full year of 10 to 15 per cent revenue growth, with adjusted profit before tax of £110m to £140m.
The company also announced the appointment to its board of Patrick Kennedy, the chair of Bank of Ireland and former Paddy Power chief executive.
Sherri Malek, an analyst at RBC Capital Markets, said the move to the main market was “another positive step for the share price”.
Read More: Asos plans move to main market of London Stock Exchange