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By Nigel Somerville, the Deputy Sheriff of AIM | Monday 17 December 2018
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
This morning AIM-listed ASOS (ASC) offered up a disastrous Trading Update noting a significant deterioration during November, that conditions remain challenging and that it was revising downwards sales growth to c. 15% (previously 20-25%), retail gross margins by -150bps (previously flat at 49.9%) and EBIT margin to 2% (previously 4%). Ouch, ouch and triple ouch. Asos saw its shares decline by a whopping 38% in early trading. So what about fledgling minnow, AIM-listed Sosandar (SOS)?
Sosandar also inhabits the online fashion sector, although it is at a far earlier stage of development. My hope had been it would offer a similar route to riches for me (with a bit of patience), having missed out on the Asos share price bonanza in the early years. But Asos’ warning this morning (and I am hearing that Asos has been heavily discounting, which perhaps suggests a few problems in house) has hit Sosandar which is down 10% so far. The question is whether this is a problem specific to Asos or a wider warning that even online retail is suffering in the run-up to Christmas this year.
At the last count, Sosandar had reported yet another record month for October and I had been rather assuming that all was well and that we would see further record months in the run-up to Christmas. So has ASOS put paid to that and should I be selling out?
I also note that AIM-listed BooHoo (BOO) rushed out a statement this morning at 8.08am which told us that everything was fine – not that it stopped BooHoo’s shares declining by 10%, but that was a big improvement on the share price before 8.08am!
So is Sosandar all go or in trouble? I contacted the company’s PR which told me that there’s nothing to report and no statement is due. In other words, trading remains in line so it looks like a bit of a storm in a teacup to me, as far as Sosandar is concerned.
With its share price now down to just 31p (it was over 40p a couple of weeks back) I’m happy to continue to hold ahead of a trading update in January, and if there is further significant weakness I might even raise my hold stance.
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