Asos shares surge on outlook, Topshop stake sale to Heartland

(Sharecast News) - Shares in Asos surged by a fifth on Thursday as the troubled online fashion retailer said it was offloading 75% of the Topshop group as part of a joint venture deal with major shareholder, the Danish fashion billionaire Anders Holch Povlsen.

Asos, which has faced severe headwinds amid the cost-of-living crisis and competition from China's Shein, also forecast annual sales to be slightly below previous estimates but added that adjusted core profit would be at the top end of market expectations.

Heartland, which is part of Povlsen's Bestseller group and has a 28% stake in Asos - will pay £135m for the stake, while Asos expects to receive £118m in net proceeds and will hold the remaining 25% in conjunction with minority shareholder Nordstrum. Povlsen already owns brands including Jack & Jones and Vero Moda.

In return Asos will retain some design and distribution rights for the Topshop and Topman brands but will have to pay a royalty fee, which it said would hit core profits by between £10m-£20m a year.

Asos bought the two brands along with Miss Selfridge and HIIT, in 2021 from Philip Green's collapsed Arcadia group for £330m including stock after it fell into administration in late 2020. It was relaunched selling clothing online only.

"The joint venture and the launch of the refinancing will accelerate our strategy to both offer customers the best and most relevant product and to turn ASOS into a company that delivers sustainable, profitable growth," said chief executive José Antonio Ramos Calamonte.

Asos also announced an amendment and extension of its existing facilities agreement with Bantry Bay Capital to May 2027 with an option for a 12 month extension and would launch an offering of £250m convertible bonds due 2028 and repurchase part of its outstanding £500m 0.75% convertible bonds due 2026.

''Topshop, once a British fashion icon, is now set to be part of a Scandi retail wardrobe. When ASOS scooped Topshop out of the bargain bin, following Arcadia's collapse, there were expectations it would form a longer-term part of its style offering. But now the Topshop brand will be majority owned by Heartland, the family-owned Danish fashion company.

Susannah Streeter, head of money and markets at Hargreaves Lansdown said the "Scandi makeover" could potentially see a return of Topshop and Topman to bricks and mortar stores globally.

"Bestseller's products are sold in 70 countries across Europe, Asia, North America, South America, Oceania and the Middle East while the wholesale business sells to more than 16,000 multi-brand and department stores globally. This deal could put Topshop back on the global fashion map: a dream Sir Philip Green tried to achieve but ultimately failed to realise."

Reporting by Frank Prenesti for Sharecast.com