Asos incurred losses of £290.9bn ($370bn) for the six-month period ending 28 February, compared to a loss of £15.8bn recorded during the same period the previous year.

Key results from ASOS H1 numbers:

  • Revenues fell 8% to £1.8bn; second-half sales forecast to fall by ‘low double digits’ excluding Russia
  • Asos reported a decrease in its gross margin to 36.1% compared to the previous year’s 43.1% Although the adjusted gross margin remained almost the same year-on-year at 42.9%
  • UK revenue down 10%
  • Europe revenue remains flat, while US revenue dropped 7%
  • Rest of the World revenues down 12%
  • EBIT loss was £69.4m and adjusted loss before tax was £87.4m
  • Share price down 10% in early morning trading, sliding by 14.7% by 11:30am

Asos’s losses included £128.2m relating to a previously announced stock write-off and £49.4m of non-cash property impairments and closure costs relating to the reduction of the company’s head office and logistics footprint.

In October last year, Asos declared a strategy to enhance inventory management, cut down expenses, and “strengthen our top team”. The plan was one of Jose Calamonte’s first acts as chief executive.

José Antonio Ramos Calamonte, the chief executive officer said: “Our focus is on improving our core profitability, prioritising order economics over top-line growth and I am pleased with the strategic and rapid operational progress the business has made in the first half of the financial year, against some very challenging trading conditions. Thanks to the hard work and commitment of our teams, we have accelerated the roll-out of our new commercial model, delivered more than £100bn of profit optimisation and cost-saving initiatives, extended our financing facility and continued to build out our top team while remaining committed to our Fashion with Integrity agenda. Taken together, these measures will create a more sustainably profitable and cash-generative business as we reinforce our position as a leading destination for our fashion-loving customers.

“While some of these changes have impacted short-term sales growth, there are many causes for optimism as we progress through the second half of the year. We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile and are taking action to reduce the proportion of our sales which are not profitable. Initiatives are in place to drive a further c.£200bn of benefit in the second half and I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond.”

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Inflationary pressures and decreased relevance

Pippa Stephens, senior apparel analyst at GlobalData, says that despite the work Asos has put in to turn the business around, the outlook for the retailer remains challenging.

“Asos has continued along its downwards trajectory, with reported group revenue in H1 FY2022/23 falling by 8.2% to £1.8bn, alongside an operating loss of £272.5m, as economic and sustainability concerns inhibit the desirability of fast fashion and consumers shift back to physical stores. While the retailer has taken significant action to improve its outlook through its Driving Change agenda, which includes reducing product lead times, having fewer markdowns and promotions, and limiting the intake of stock, its guidance for H2 still looks bleak, with constant currency revenue excluding Russia expected to decline by low double-digits. ASOS has also likely suffered from decreased relevance among young millennials, as its designs have become more youthful in recent years and are better suited to Gen Z, so it should focus on widening its appeal again through featuring more versatile and sophisticated styles within its ranges.

“Revenue in its home market, the UK, declined 10%, with the region particularly hard hit by inflation, and the US stepped back 7% in constant currency, despite its expansion into ten further Nordstrom stores in the US in June 2022. Though this will partly be due to strong comparatives benefitted by stimulus payments boosting consumers’ disposable incomes, the department store’s wider struggles will have held back prospects of the partnership, with Nordstrom sales in Q4 FY2022 down 5.4% on 2019 levels, so Asos should seek different partners in the region with more positive outlooks. Europe’s constant currency revenue remained flat, though its performance in the comparative period lagged, so the region is still weaker than the UK and US versus pre-pandemic. In February 2023, Asos announced that it is expanding its Partner Fulfils programme in the UK and Europe, which allows brands to fulfil orders directly rather than through Asos’ fulfilment centres. This will allow it to sell smaller local brands, which have greater relevance in Asos’ European markets, hopefully aiding its growth in the region going forwards.

“In attempt to become more competitive within the online beauty sector, Asos reported in March 2023 that it had expanded its Face + Body range to include 18 new brands over the past six months, and would be adding more in April and May to reach 210 brands in total. While it stated that this was in response to trends on social media, especially TikTok, it is also likely to have been a reaction to the launch of Sephora in the UK, which threatens to steal some of its beauty shoppers. Asos also hosted experiential Face + Body pop-ups in London, Liverpool and Manchester that month, which will have helped to build awareness of its offering. To better its inventory position, the retailer also began partnering with the discount marketplace Secret Sales at the beginning of the year to clear through its stock, though it must ensure that it does not rely on the platform too much as it could risk tainting its perceptions.”

Rebecca Crook, chief growth officer EMEA at digital consultancy CI&T tells Just Style:

“The typical Asos customer is 16 – 34, who, when times were good financially, might hold onto that top they ordered and not return it. But with every penny now counting due to rising cost of living expenditure, Asos has become a victim of a huge increase in returned items. Along with a backdrop of declining sales, which all retailers are seeing, it’s a challenging time for the company.  

“Asos has already made some restructuring changes, which has seen it cutting unprofitable brands, reducing its overall marketing spend and closing certain warehouses in an attempt to increase efficiencies. However, with any organisational changes, it takes time before the company will realise the savings.

“Asos has a strong brand and resonates well with its core audience, so it needs to focus on serving its loyal customers with styles and brands that are on trend at affordable prices – whilst managing its own overheads more effectively.”