Asos reported a decrease in sales due to its efforts to reorganise stock, which included a 30% reduction in stock intake year-on-year to “right size” stock levels and clear out old inventory.
Asos has also been pursuing cost-cutting measures to enhance profitability, after it previously warned that sales will continue to fall in 2024.
Go deeper with GlobalData
However, GlobalData senior apparel analyst Pippa Stephens believes the retailer’s product offerings just aren’t resonating with Gen Z. Stephens says its target consumers are continuing to switch to more affordable fashion players such as Shein and Cider, while older millennial consumers are “trading up to more premium brands for greater quality and value for money.”
Asos has confirmed that it is on track with its plan to reduce stock and intends to hold more clearance sales in the last six months of the financial year.
José Antonio Ramos Calamonte, CEO at Asos, explained that cutting stock in H1 was “the medicine we needed to take,” even though it meant fewer new clothes on the site.
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GlobalData’s Stephens admitted that the company’s H1 declines were seen across all of Asos’ market, with the worst being the US and the rest of the world where revenue dropped 25% and 36% respectively.
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By GlobalDataShe attributes this to the online retailer’s physical partnership with US department store Nordstrom which is “struggling to gain traction” as US customers are facing cautious on spending due to economic challenges “denting its top line.”
Europe came out as the strongest region for Asos, despite sales slipping by 11% due to inflation while sales in the UK declined by 15.9%.
Asos reported a 18% like-for-like sales decrease on an adjusted basis in H1 and said it still anticipates sales to decrease by as much as 15% over the full year.
Key results from Asos H1:
- Total revenue in the UK increased to £676.1m.
- EBITDA was reported at £16.3m compared to £4.6m the previous year.
- Expected sales decline between 5% and 15% for FY2024.
Asos cited progress under its ‘Back to Fashion strategy’, focusing on improving speed, agility and profitability, as a highlight in the period.
Stephens also noted that Asos’ Test & React model has helped it reduce lead times down to two to three weeks. The model is now used across 5% of its ranges “allowing it to be more agile and reactive to trends.”
Asos said it is “working hard to increase speed to market across all our own design product” and plans to significantly reduce lead times, particularly in long lead regions. The retailer said it had already a c.30% reduction in lead times by key suppliers for its jersey, denim and dresses ranges.
What next for Asos?
Calamonte said: “At the beginning of this year we explained that FY24 would be a year of continued transformation for Asos as we take the necessary actions to deliver a more profitable and cash-generative business.
“Asos is becoming a faster and more agile business, and we are reiterating our guidance for the full year as we lay the foundations for sustainably profitable growth in FY25 and beyond.”
The retailer has reiterated its full-year guidance of a sales decline between 5% to 15% and is committed to accelerating towards an 8% EBITDA margin in the mid-term.
Asos has also appointed Dave Murray as chief financial officer (CFO), replacing interim finance chief Sean Glithero. Murray was previously the CFO of Matches Fashion, which collapsed earlier this year.
