ASOS (LON: ASC): Should you buy before it moves to the main market?

FTSE AIM-listed online fashion retailer ASOS Plc (LON: ASC) has finally disclosed its intent to move to the London Stock Exchange’s main market. Since its listing in October 2001, the stock has been part of the AIM index and gradually went on to become one of the largest companies listed on the AIM market. The stock has given more than 11,000% return to its investors since its listing price of 20p per share.

The company has already started preparation for its main market listing through improvement in its reporting and governance standard as required for the main market. The proposed change could take place in February 2022. According to ASOS Plc’s current market cap, the shares are eligible to be part of mid-cap focused FTSE 250 index.

Business update

The online fashion retailer announced its business update for the four months to 31 December 2021. It reported total revenue growth of 5% at £1,393.1 million on a constant currency basis. The active customer base of the company now stands at 26.7 million. However, the company’s full-year profit margins could take a hit due to increased spending on shipping and wages. Most importantly, the company’s economic impact report has stated that it will boost the UK economy by £3.8 billion apart from creating over 25,000 jobs in the next four years.

The company increased wages for warehouse staff amid a labour shortage. Moreover, due to supply chain constraints caused by the Covid-19 pandemic, the company had to air freight more stock leading to higher shipping costs. Many online retailers, including rival Boohoo Group Plc, has been facing supply chain bottlenecks due to pandemic and Brexit, adversely impacting the business growth and stock price.

Will 2022 be a different year for the company?

The listing on the UK’s main market would help the company to enhance its investor base. As per the company, the move to the main market has been received positively by its shareholders. 2022 might lead to a change in fortune for the company’s stock, which is down by over 50% in the last year.

Despite slow growth in the first four months of the new financial year, the company remains firm on its full-year guidance. It anticipates revenue growth in the range of 10%-15%, while its adjusted profit before tax could be around £110m-£140m.

In addition, last year, the company has started its management shake-up, which led to the stepping down of its then CEO Nick Beighton. It is currently looking for a new chief executive officer to run day-to-day operations at the company. Mat Dunn is currently overseeing the business operation until the appointment of full-time CEO.

The positive business outlook, management change, and shareholder confidence could help the company deliver a good return to investors in 2022.

 ASOS Plc’s stock performance

(Image Source: Refinitiv)

After announcing its plans to move its shares to the main market last week, the company’s stock has been witnessing good buying interest from investors. The current market cap of the company stands at £2,380 million as of 18 January 2022.