Asos has warned sales will continue to fall in the year ahead – by much as 15% – after delayed results revealed a near £300m annual loss.
Shares fell almost 8% on Wednesday to 365p after analysts expressed fears that the online fashion retailer would need to raise new cash – potentially through the sale of its Topshop brand – with net debt including leases now at £648.5m, up from £533m a year before.
Asos said it planned to sell or mothball its fulfilment centre in Lichfield, Staffordshire, later next year. The site has assets worth £110m but lease liabilities of about £30m, plus a potential cost of £45m to complete an automation fit out. More than 200 people are employed at the warehouse and their jobs are potentially at risk.
José Antonio Ramos Calamonte, Asos’s chief executive, said the company was reducing the amount of stock it held and so did not think it would need the Lichfield site. Calamonte said the closure was about “relentless discipline to optimise costs” and not linked to raising money, adding: “We ended this year with available cash of £430m which is certainly more than enough.”
He declined to comment on “speculation” about the sale of Topshop but said selling off unwanted stock would also bring in more cash. Calamonte, who became chief executive last year, indicated that Asos would be using the Black Friday discount period later this month to offload more unwanted stock,more than a £1bn of which had built up under the previous management.
Calamonte said Asos had made “good progress” in “a very challenging environment”, not helped by unseasonable weather conditions over the summer and autumn, and would continue to bring in new more fashionable stock and invest in its brand.
The company plans to spend £30m more on marketing and said it was going “back to fashion” with its products “geared around fashion and excitement”.
Asos has been hit by a shift away from buying online since the Covid pandemic restrictions ended, as well as heavy competition from companies such as the fast fashion online specialist Shein and retailers with a combination of stores and online retail, such as H&M and Zara.
Calamonte said shoppers were reacting well to Asos’s more fashionable new products but were shifting towards lower priced goods and returning more items in reaction to the cost of living crisis. He added that the company had worked with supplier to offer more items under £10 to cater to shoppers’ needs.
He said the group had been able to hold its profit margins by shifting its sources of supply and by using a “test and react” model so that it could stop supplies of unpopular items quickly or increase orders for those in demand.
Asos is having to find ways to work more efficiently as higher labour, fuel and energy costs continue to weigh down on the company. Calamonte said there was some reduction in raw material costs. Unlike several rivals including Boohoo, Asos has opted not to charge its shoppers for returning items.
Sales fell 10% to £3.5bn in the year to 3 September as losses widened to £296.7m from £32m a year before, according to the annual results released on Wednesday – a week later than originally planned.
Pippa Stephens, a senior apparel analyst at the analytics and consultancy firm GlobalData, said Asos’s product offer continued to “struggle to hit the mark with its core shoppers”.
“Alongside the ongoing inflationary pressures, the retailer has seen its Gen Z customers shift towards more agile and affordable competitors like Shein, while its designs have become too youthful for the millennials that grew up with it,” she said.
Calamonte said clearing of unwanted stock throughout the year ahead would “remain a drag on sales growth and profitability”. Sales are expected to fall by between 5% and 15% but the company said it expected to reduce net debt by generating cash from the sale of stock.
