Shares in the British online fashion retailer Asos closed up 13.3 percent to 26.59 pounds, or $44.07 Wednesday, after climbing on the back of market speculation that a U.S. firm is interested in buying the 27.4 percent stake in Asos owned by the Danish clothing firm Bestseller. Amazon and eBay were among possible bidders mooted in a report in London’s Daily Mail Wednesday, which cited “vague talk of a U.S. cash bid in the region of 50 pounds [$83] a share.” A spokesman for Asos declined to comment Wednesday.
But David Reynolds, equity analyst at Jefferies in London, was skeptical of the reports. “The source of the rumors makes me question them and the detail of the reporting makes me question them,” said Reynolds, noting that the Mail described the speculation as “vague.” Reynolds also said that a bid of 50 pounds per share, “given that the stock is trading in the twenties, is nonsensical.” He also said that eBay and Amazon would likely see that Asos’ “young, fast fashion and edgy," identity could be compromised by becoming part of a larger retail group.
The speculation follows a tough few months for Asos’ shares. In June the retailer’s stock tumbled 31.4 percent in one day, when Asos warned that its profit margin for the current fiscal year would be lower than expected. It forecast a dip in its EBIT margin to around 4.5 percent from around 6.5 percent, as a result of selling more product in lower-margin regions such as the U.K. and U.S., and higher promotional activity. That followed a 17 percent fall in Asos’ stock price in March, when the retailer forecast an initial fall in its EBIT margin due to increased costs relating to warehousing, IT costs and its China start-up.
“People want to believe [the bid talk] because it has been a traumatic eight months [for online retailers] – the value of stocks [in the sector] has divided by four,” said Reynolds. “The market wants to believe but…that doesn’t have an impact on the credibility of rumors.”
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