Fashion giant ASOS Plc (GB:ASC) yesterday saw shares plunge as it revealed it was in final stages of negotiation for the amendment of its £350 million credit facility to give the company more flexibility.
The company also said its insurer, Allianz Trade, has reduced its credit cover for suppliers, leading to more pressure on its cash flow.
The company’s shares went down by almost 13% yesterday, and ended down by 3.5%.
The company is struggling with falling demand for its products after pandemic restrictions were lifted.
The company’s biggest lenders are in discussion with the company over the change in the terms of its borrowing. This could lead to an overall financial restructuring of the company.
ASOS remains positive that this move will give more financial flexibility to the company. It said, “ASOS retains a strong liquidity position and this is a prudent step in the current environment.”
The stock has fallen by a massive 77% in the year so far.
What does ASOS stand for?
ASOS stands for ‘as seen on screen’ as it is known for providing styles as seen in films and TV.
The company was initially launched as ‘AsSeenOnScreen Limited’ which was later changed to ASOS.
ASOS share price forecast
According to TipRanks consensus, ASOS stock has a Hold rating.
The ASC target price is 1,051.9p, which has a huge upside potential of 103.6%.
Ending thoughts
Inflationary pressures have led to tighter budgets and reduced consumer spending, hurting the company’s sales.
The company has already announced that profits will be at the bottom end of its guidance range. The company’s financial troubles have just added more fuel to the fire.
