It’s been a loopy week on international inventory markets. The FTSE 250 Index fell 9% in latest days to sit down as little as 17,890 factors however recovered strongly after US President Donald Trump’s tariff pause to sit down at 18,570 as I write on April 11.

The market strikes brought on by the ‘Liberation Day’ tariff bulletins imply many corporations making up the UK mid-cap index have suffered sharp share price falls — and one on-line retailer particularly has caught my eye.

Overwhelmed down FTSE 250 retailer

ASOS (LSE: ASC) is the corporate in query. The net retailer has seen its share price plummet 37% for the reason that begin of the 12 months to 274p per share as I write.

The corporate’s market cap is sitting round £327m — a far cry from the £530m valuation held as not too long ago as December. So, what’s put the corporate’s share price underneath a lot stress?

Fierce competitors

On-line fast-fashion is a tricky enterprise. The FTSE 250 firm constructed its success on quickly producing trend clothes for shoppers however the nature of the sport can shortly change.

One huge issue weighing on the corporate’s share price of late is the explosion in reputation of different, lower-cost fast-fashion e-tailers similar to Shein. Greater cost-of-living pressures are additionally an element as shoppers watch their purses just a little extra carefully.

This has damage gross sales and profitability, with the corporate’s income falling 18.1% in 2024 to £2.9bn as gross sales declined throughout all geographies.

Working losses additionally widened by 33% through the 12 months from £248.5m in 2023 to £331.9m final 12 months. I wouldn’t anticipate to see any dividends from the web retailer any time quickly.

The share price has been underneath stress in latest days as traders weigh the affect of proposed tariffs on China — a key a part of ASOS’s provide chain.

To purchase or to not purchase?

You will have heard the phrase: “Don’t try to catch a falling knife”. That is when traders attempt to purchase the dip in a falling share price, just for it to fall additional and trigger extra losses.

The corporate’s share price was already underneath important stress earlier than the tariff bulletins. Fierce competitors in a consumer-facing business makes ASOS a difficult inventory to worth at current.

Nevertheless, if the corporate can implement cost-cutting measures and increase profitability, I feel it may flip issues round. On-line retailing is a fast-moving sport, and the power to identify traits and keep a low-cost and agile working mannequin is essential.

There’s additionally the prospect that the corporate might be a beneficiary if it might probably navigate the affect of the tariffs by shifting manufacturing and specializing in key development markets.

One different potential carrot dangling in entrance of traders is the corporate’s rumoured standing as a takeover goal which may entice a premium bid from potential suitors.

My verdict

I personally assume the challenges dealing with the corporate outweigh the potential alternatives. Whereas the latest share price declines has pushed ASOS’s valuation decrease, alternatives in non-cyclical industries like prescription drugs are of upper precedence for me at current.

It might be one to maintain on the watchlist and revisit as soon as the valuation has stabilised and there are indicators of a transparent pathway to get well gross sales and profitability sooner or later.