Asos Announces Topshop JV, Says FY24 Sales Slightly Below Guidance

Online fashion retailer ASOS (LON: ASC) announced a series of developments on Thursday, including a refinancing plan, a joint venture for the Topshop and Topman brands, and a trading update for fiscal year 2024 (FY24).

Firstly, ASOS said it is launching a refinancing package that includes two key components: An offering of approximately £250m Convertible Bonds due 2028 and a concurrent partial cash repurchase of the outstanding £500m 0.75% Convertible Bonds due 2026 issued by Cornwall (Jersey).

Additionally, the company has secured an extension and amendment to its existing facilities agreement with Bantry Bay Capital, extending it to May 2027 with an option for a further 12 months.

Meanwhile, following a competitive sale process, ASOS revealed it has entered into a binding agreement with HEARTLAND to form a joint venture for the Topshop and Topman brands. The JV will grant ASOS specific design and distribution rights for the Top Shop and Top Man brands in return for a royalty fee to allow it to continue marketing and selling the brands online.

For FY25, the company said the transaction is expected to have a £10-20m negative impact on EBITDA and to be increasingly EBITDA accretive over time.

HEARTLAND will hold a 75% interest in the joint venture for £135 million, valuing the brands at £180 million.

ASOS will retain a 25% stake, with the option to sell an additional 5%. The transaction is expected to generate approximately £118 million in net cash proceeds, which will be used to strengthen ASOS' balance sheet.

ASOS believes the joint venture is in the best interests of its stakeholders for several reasons: It will allow customers to continue accessing Topshop and Topman products through ASOS, enable ASOS to focus capital on its core “Back to Fashion” strategy, facilitate the relaunch of Topshop.com, explore new global expansion opportunities, and provide ASOS with the opportunity to participate in the future growth of the Topshop and Topman brands.

Meanwhile, while full-year results are forthcoming, ASOS provided some guidance for FY24.

Adjusted EBITDA is expected to be at the top end of consensus estimates, but its sales for the period are expected to be slightly below previous guidance. All other guidance remains unchanged.

José Antonio Ramos Calamonte, CEO of ASOS, emphasised the importance of these announcements for the company's future. He highlighted the joint venture and refinancing as key steps in ASOS' continued transformation, aimed at offering customers the best and most relevant products and achieving sustainable, profitable growth.