If Amazon.com, Inc (NASDAQ:AMZN) does indeed purchase ASOS plc (LON:ASC), the whole deal would be a waste for the U.S. electronic commerce giant, Steve Mader said in a discussion about the possible acquisition on CNBC.
The comments from the retail insights director at Kantar Retail about Amazon.com, Inc (NASDAQ:AMZN) were made after the Silicon Valley veteran has been rumored to be in talks with ASOS for a possible acquisition.
“Amazon has huge cash reserve so they can very easily buy ASOS if they want to. However, we are of the opinion that the strategic fit just isn’t quite there. Amazon likes to acquire businesses that either they don’t have category expertise in – which is why we saw them buy Zappos a number of years ago in the U.S. – or allows them to enter new markets. ASOS doesn’t tick any of those boxes at the moment,” Mader said.
Aside from the possible Amazon.com, Inc (NASDAQ:AMZN) takeover, Mader talked about how vulnerable ASOS could be, especially since it is a technology company in retail which only sells fashion categories. When a company like this invests heavily in growth, he noted, it’s going to be tiptoeing around tight profit and will be affected by currency fluctuations.
Currency fluctuations especially affect ASOS as it makes a significant part of its revenue outside its home in the U.K. region.
Nonetheless, the Kantar Retail executive did say at a later part of the interview that what is happening in the internet fashion retail industry in that part of the globe is that competition is helping rid the industry of bad businesses. He said he believes ASOS is a good business which is why it is surviving.
Earlier this month, UBS issued a note to clients recommending ASOS as a “Buy” in light of the possible Amazon.com, Inc (NASDAQ:AMZN) acquisition which the financial institution said could be worth up to £50 per share, according to The Guardian. ASOS was then trading at above just below £20.
Amazon.com, Inc (NASDAQ:AMZN) shareholders includes Eashwar Krishnan’s Tybourne Capital Management which reported owning 583,225 shares in the company by the end of the second quarter of the year.