Fast fashion retailer Asos has plunged to another huge loss but insisted it can see the “green roots” of recovery after a painful two year turnaround.
The company, which has a joint venture with former Philip Green brands Topshop and Topman, revealed a pre-tax loss of £379.3 million for the year to end September compared with £296.7 for the same period last year. Group revenues dropped 16% to £2.9 billion. But it said sales of new ranges were up 24% while sales of its mountain of old stock fell 30%.
Shares in Asos, which was once valued at more than Marks & Spencer with a market cap of more than £6 billion fell more than 3% reducing its value to just £430 million.
CEO José Antonio Ramos Calamonte said: “We achieved our key priorities for the year, significantly reducing our inventory position, while generating positive adjusted EBITDA and free cash flow. Following the year end, we further strengthened our balance sheet with our Topshop Topman joint venture and our refinancing.”
He added: “We have already seen the green shoots in the performance of our new stock in recent months which gives us confidence that our new commercial model is delivering customers the right product at the right time. This will be the driving force behind our gross margin improvement back towards 50% in the medium term.
“Our relentless focus on operational efficiencies and optimising our cost to serve have laid the foundations to be able to deliver future growth without sacrificing margins.”
In its outlook statement the company said that “as a result of the significantly higher mix of full-price sales and the decisive actions taken to improve order economics, we are confident in achieving significant profit improvements in H1 FY25 and the full year regardless of revenue levels. “
Julie Palmer, partner at Begbies Traynor, said:“Today’s results from ASOS showcase quite how damaging the last 12 months have been for its performance as like-for-like revenue fall 16% and losses continue to mount.
“Unfortunately, the highly competitive fashion retail market has not been kind to ASOS, which has seen its once prominent position toppled by low-cost, fast fashion players like Shein, as well as the growing popularity of the second-hand marketplaces like Vinted.
“While the sector has clearly been encouraged by recent efforts to shore up the retailer’s financial position, most notably through the sale of Topshop into a JV, ASOS still has a lot more to do to allay concerns.
“Unless the online only retailer can adapt to the latest consumer trends, offer compelling value and differentiate itself in a crowded market, its performance will remain on shaky ground.
“Consumer confidence is likely to stay suppressed after last week’s budget, so ASOS must find a way to reconnect with its cost conscious audience if it is to reclaim a leading position in the ever evolving online retail market."
But Yanmei Tang, analyst at Third Bridge said Asos is executing its "back-to-fashion" strategy by shifting its focus from dresses to a more balanced mix of casual wear, athleisure, and everyday styles. This change not only enhances profitability but also allows for a wider range of trends and storytelling in marketing. By refining its offerings, Asos aims to attract a diverse customer base, from aspiring teenagers to style-conscious thirty-somethings.
“Asos has shifted its focus from rapid sales growth to profitability, reducing stock and emphasizing products with higher contributions. While this may hurt short-term sales, our experts believe it’s a smart move for long-term sustainability, especially in challenging markets like the US and Germany, where returns can be high.”
