Fashion retailer ASOS (ASC) announced a £32 million loss for the year to August but the shares rose 12% to 550p nonetheless. The loss follows a £177 million profit for the previous year. ASOS also warned that it expected to make a loss in the first six months of this year.

So why has the share price gone up?

The most important reason is probably that the recently appointed CEO Jose Antonio Ramos Calamonte reassured the markets there would be no need to issue new shares. ASOS had admitted on Monday that it was renegotiating the terms of its debt covenants with lenders and that triggered speculation that the company could end up in a cash crisis. Such a crisis might force ASOS to raise cash by issuing fresh shares.

Investors were also impressed today that Calamonte announced a clear strategy to reverse the recent poor performance. He announced plans to deal with supply chain problems, refresh the fashion ranges and update the culture of the company. He also said that there would be further price cuts to clear stock. What’s more, he’s reviewing the performance of the international markets and it’s possible that ASOS might stop operations in one or more territories. It’s worth noting that overall sales grew 1% last year, but UK sales rose 7%.

Calamonte said all the right things today and there’s a good chance he will succeed. However, financing remains a worry. In August 2021, ASOS had a net cash holding of £200 million, but a year later that has become a net debt position of £155 million. That trend has to slow down at the very least. If it doesn’t, a further share issue could still be on the agenda regardless of Calamonte’s reassuring words.

Wednesday's biggest UK stock market risers and fallers