Evil Knievil: Reality sinks in for ASOS

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Evil Knievil: Reality sinks in for ASOS
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I doubt if this is the moment to consider whether IHT relief will persist on AIM stocks. But I increasingly think that there is no economic reason in so far as HM Treasury is concerned to suppose that it will for ever. If and when it is withdrawn the down draft on the likes of ASOS (LON:ASC) will be pretty heavy – after all, there are relatively few eligible stocks in practice.

Of course, ASC has held up for many years and many have presumed it will stay up for ever. However, yesterday’s profit warning caused reality to kick in. TNAV is of the order of £1 and the profit outlook for the year to March 2019 might be of the order of £50 million but since that sum had already been put in the tin by 30th September and October’s trading had been satisfactory, current trading must be truly dire.

It is here that the optimists are making a mistake. They reckon that the profits will kick back in. I doubt it. Excess capacity in the industry has kicked in and it will not go away (BooHoo (LON:BOO) is similarly affected and may be the better short).

ASC is capitalised at £2bn+ and looks extremely vulnerable at £27.

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