Trending tickers: ASOS | Airbnb | J D Wetherspoon | TUI
A look at the stocks making headlines on Wednesday
ASOS Plc (ASC.L)
Shares in ASOS were down nearly 12% on Wednesday in morning London trade after the British online fashion retailer reported a deeper half-year loss and said it faced a challenging trading backdrop.
Its sales were down 8% and its revenue to February 28 dropped to £1.8bn from £2.0bn. The FTSE 250 company also posted a £290.9m pre-tax loss, compared to the £15.8m loss a year earlier.
José Antonio Ramos Calamonte, the company’s chief executive, said its focus is on improving core profitability and prioritising order economics over top-line growth.
“We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile, and are taking action to reduce the proportion of our sales which are not profitable. Initiatives are in place to drive a further c£200m of benefit in the second half and I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond.”
Russ Mould, investment director at AJ Bell, described the half-year results “as ugly as sin”.
“Sales and margins are down, net debt has ballooned and pre-tax losses are getting a lot worse. It’s all very well having a turnaround plan, but at some stage you have to show results and it feels like ASOS should have been delivering the goods by now.
“The company implies the economic backdrop has been unfavourable which has hampered its progress. It’s at times like these that consumers look for bargains which means ASOS’s decision to cut back on markdowns is somewhat ill-timed. Yes, it is prioritising profits over volumes, but it also needs to be in tune with what the consumer wants,” he said.
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Mould also noted how ASOS has suffered in the past from having too much inventory and too much discounting, which has essentially made the customer associate the brand with cheap products.
“If it takes away the discount carrot then customers are going to turn their nose up and shop elsewhere. ASOS has been the architect of its own mistakes and is now paying the price,” he added.
Investors will also be keeping an eye on Airbnb shares today after the company’s stock extended losses and tanked nearly 12% on Wednesday just after market open, following its first-quarter earnings release.
The US online marketplace for short- and long-term home stays and experiences beat analyst estimates, however, on the top and bottom lines. Although it posted slightly weaker-than-expected guidance and a cautious outlook for the current quarter.
Its total revenue rose 20% year-over-year and it moved to a net profit of $117m, from a net loss of $19m in the year-earlier period. Airbnb also announced a new $2.5 billion stock buyback.
Looking ahead, Airbnb is looking to increase host supply. "Travelling on Airbnb is mainstream," the company's shareholder letter said. "We want hosting to be just as popular. To achieve this, we are raising awareness around hosting, making it easier to get started, and providing even better tools for hosts."
Russ Mould at AJ Bell also noted how the company was keen to talk about its plans to integrate AI into the business.
“However, investors care about the brass tacks of bookings and prices and both are heading in the wrong direction as far as Airbnb is concerned.
“This is unsurprising, people are likely to opt for the most affordable accommodation on the platform if they can. Perhaps a bigger worry is this could be the first sign that the impressively resilient spending on travel in the wake of the pandemic is coming under greater pressure,” he said.
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Mould also noted that the company faces a competitive threat from the likes of Booking.com and Expedia-owned Vrbo and could also face stricter regulation.
“There are plans in the UK, for example, to make homeowners listing entire properties on short let platforms to have to seek planning permission first.”
J D Wetherspoon plc (JDW.L)
Back in the UK, shares in the pub chain J D Wetherspoon were up nearly 7% after it reported a 12.2% increase in third-quarter (13-week period to 30th April 2023) like-for-like sales versus 2022 – and a 9.1% jump versus pre-pandemic.
It said Easter week sales were the highest-ever and sales in the current financial year are likely to reach a record high.
Wetherspoons also highlighted that the first bank holiday was "exceptionally strong" but said the Coronation weekend suffered from a quiet Saturday, possibly because of greater spending in supermarkets instead of pubs.
Year-to-date, Wetherspoons has opened three pubs and closed 21, resulting in a net cash inflow of £4.7m.
Meanwhile, the company’s chairman, Tim Martin, said Covid restrictions have had “more profound and longer-lasting consequences” than most predicted. He also said that inflation remains a more “intractable issue”.
Victoria Scholar, head of investment at Interactive Investor, commented: “ Wetherspoons has been battling with a softening consumer and rising costs amid the backdrop of labour, energy and food inflation. These have been putting further pressure on the business after the pain of the pandemic when lockdowns meant pub chains were forced to close. To offset these headwinds, Wetherspoons has been focusing on streamlining its trading estate, with 21 pub disposals and a further 30 pubs on the market.”
Scholar also noted how last year was extremely tough for Wetherspoons as it saw its shares fall sharply and it recorded a £26.1m loss.
“However since the lows in the final quarter of 2022, shares have been in a cheerier mood with the stock up over 70% year-to-date as Covid drifts to the rear-view mirror, its pub disposals generate cash inflows, and thanks to growing hopes that inflation will finally start to ease,” she added.
Shares in TUI were down nearly 5% at the time of writing as investors reacted negatively to the group’s first-half results.
The German leisure, travel and tourism agency, reported a seasonal loss of €242.4m for the six months ending 31 March 2023, compared to a loss of €329.9m in the same period last year.
TUI also said it expects strong revenue and higher profit for the full year of 2023 on the back of strong booking momentum for the busy summer travel season.
“Strong booking development and significantly improved quarterly figures underline our expectations: it will be a strong summer and a good financial year 2023 with a significantly higher operating result,” chief executive Sebastian Ebel said in a statement.
TUI also said group revenue increased by 48% to €3.2bn – above pre-pandemic levels – compared to €2.1bn in the same period last year.
Russ Mould commented on why TUI shares dropped following the update.
“A negative reaction to TUI’s first-half results may be the fact summer bookings still haven’t quite recovered to pre-pandemic levels.
“They may not be far off but investors have had to wait some time for a proper recovery and they backed the company in a big fundraise recently so patience may be starting to wear a bit thin,” he said.
Mould also noted that whilst bookings are up and, for now, the company is able to pass higher costs on to holidaymakers, people’s capacity to spend on jetting away looks set to continue to be tested given persistent inflationary pressures.
“Competitive pressures also remain, with Jet2 taking TUI’s mantle as the biggest package holiday firm in the UK this year, and there is definitely no room for complacency,” he added.
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