Hedge funds’ bets against Asos come apart at the seams as fashion retailer’s shares surge

Asos

Hedge funds betting against Asos have seen their positions squeezed as the online fashion retailer’s share price surged further this week following upgraded profit forecasts.

Citadel Europe, the global multi-strategy hedge fund, and London-based long/short giant Marshall Wace currently hold short positions against the UK-based retailer, according to regulatory disclosures.

Asos’ share price jumped from 4,319pp on Monday to 4,953pp on Thursday morning, after it announced pre-tax profit expectations of between GBP130-150 million on Wednesday, outweighing analysts’ initial forecasts of around GBP58 million.

Despite the UK sliding into a deep recession during the second quarter, Asos’ sales have grown in recent months, as shoppers migrated online after physical retail outlets were ordered to close during the coronavirus lockdown. Its year-on-year sales will be up between 17-19 per cent, some 3 per cent higher than initial estimates, according to media reports.

Asos has been a regular target of hedge fund short sellers, with Gladstone Capital Management, AQR Capital Management, Capeview Capital and Polar Capital among those betting against the retailer in the past.

The ‘fast fashion’ clothing sector has come under close scrutiny this summer after exploitation concerns were raised against Boohoo.com regarding pay and working conditions at some of its Leicester factories.

According to regulatory disclosures, Lansdowne Partners and PSquared Asset Management currently hold short positions against Manchester-headquartered Boohoo, which had previously been given positive scores on a range of ESG (environmental, social and governance) metrics.