Investors will be keeping a close eye on Asos (LON: ASC) this week, with the online fashion retailer is expected to report a loss in its interim results on Wednesday.

Asos shares have gained over 30% this year, however it remains significantly below the highs seen during the pandemic. The group reports results for the six months to the 28 February, which will shed more light on how the online fashion market is faring against consistently high inflation.

Asos’ previous trading update saw revenue fall 3% for the four months to 31 December, broadly in line with expectations. UK total sales declined 8% YoY as inflation continued to impact consumer spending, but sales among the rest of the world fell more extensively, declining 31%.

The retailer stated that trading during the period had been “volatile” and is expected to remain volatile throughout the financial year. As a result, Asos anticipates significantly improved profitability in H2, following a loss in H1.

Although a loss is expected in the first half, investors will be watching for signs of improving demand in a difficult macroeconomic environment. Our tracking of consumer data shows Asos consumer happiness has become slightly more positive lately.

Another key measure to watch will be how the online fashion retailer’s strategic and operational changes have impacted profits as costs continue to soar.

In February, Deutsche Bank downgraded Asos to Hold from Buy, raising the firm’s price target on the stock to 950p from 800p per share, stating that they prefer discounters and physical retail over online.

Meanwhile, five analysts currently rate Asos at Hold, with the average price target of 835p representing a potential 20% upside, according to TipRanks.

By Jamel Boughedda