The fact ASOS is talking to its lenders about more flexible borrowing facilities just goes to show how conditions are very challenging for retailers.
Reports that Allianz Trade has more than halved its insurance cover for ASOS suppliers would suggest the online retailer is seen as a higher risk entity.
AJ Bell’s Russ Mould said: “Suppliers take out insurance cover as protection between taking an order and being paid for it. When cover is unavailable, suppliers seek upfront payment from customers, which can put pressure on the latter’s finances as they need to hand over cash before being paid by their own customers.”
Retailers have been struggling with the cost-of-living crisis where consumers are watching every penny, while at the same time they have had to stomach higher costs. Many shopkeepers, virtual or physical, have seen a rise in inventories as demand has weakened. This clogs up valuable storage space and raises the risk they’ll have to slash prices just to shift the stock, thereby depressing profit margins.
The news is yet another reason for investors to stay negative on ASOS shares, which are now down 78% year-to-date and are trading at a 12-year low.
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