Asos (LON: ASC) and Boohoo (LON: BOO) share prices have lost the momentum they had earlier this year. After rising to 1,104p in February this year, Asos stock has plunged by more than 30% to 686p. Similarly, Boohoo shares jumped to a high of 60.98p in April and then pulled back by over 21% to 47.66p.
Internal and external challenges
Asos and Boohoo are some of the best-known fast fashion retailers in the UK. In addition to their eponymous brands, they own several other smaller companies as well. Asos owns Miss Selfridge, Topshop, and Topman while Boohoo owns Karen Millen, Coast, PrettyLittleThing, and NastyGal among others.
Boohoo and Asos thrived during the pandemic as most people shifted to online shopping. As a result, their stocks responded by surging to record highs. Recently, however, the two companies are contending with internal and external challenges.
The biggest external challenges are the growing risks of a recession, high inflation, rising cost of doing business, and competition from the likes of Shein. These challenges have helped push the two companies in the loss zone.
Internally, they have faced challenges. In April, Boohoo accepted to pay $147 million to settle a price lawsuit in the United States. The company also faced the challenge of its business practices, high inventories, and more returns.
Earnings to provide more color
ASOS vs BOO stocks
Early this year, I noted that I was optimistic about Boohoo. At the time, I argued that the company had become incredibly cheap and a good turnaround story. I also noted that public data showed that visitors to its websites and apps was doing well.
Further, and this applies to Asos, the challenges that exist in 2022 like high inflation and logistics seem to be easing. As I wrote in this article on ZIM Integrated, ocean shipping costs have retreated sharply. Also, competition from Shein seems to be easing while the strong pound could be positive.
Therefore, the Boohoo and Asos share prices will react to the upcoming earnings, which will provide more color about the state of their business. Asos will publish its financial results on May 9th of this year while Boohoo is expected to publish results on May 15.
It is still ealy to predict the exact numbers but I expect the management to reiterate that their turnaround strategies were working.
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