Industry analysts offer their views on ASOS’ latest full-year figures:

Chloe Collins, senior retail analyst at GlobalData:

“Fast fashion is continuing to suffer in the wake of rising inflation and living costs, with Asos being the latest to publish lacklustre results, as group retail sales for FY2021/22 fell by 0.3% to GBP3,772.6m — a steep slow down after almost 20% growth in the prior year — alongside an operating loss of GBP9.8m. New CEO José Antonio Ramos Calamonte has announced a new business plan including focusing more on its key markets, reducing markdowns and promotions and introducing shorter buying cycles and more nearshoring so it can react quicker to rapidly changing demand. This seems to have provided investors with some optimism this morning with shares recovering from the 12% plunge on Monday morning, after it confirmed amendments to its credit facility to face the current headwinds, however shares are still down almost 80% on this time last year. Asos’ core 20-something consumers will be some of the hardest hit by rising cost of living due to their typically lower wages, and they will have become accustomed to Asos’ frequent discount days in the last year, so removing these – on top of already increasing own-design prices by mid-single digits – could lead to its shoppers trading down to more affordable retailers like Primark and H&M.

“Performance in the UK in FY2021/22 was surprisingly resilient, with growth of 6.7% despite it being one of the countries most impacted by inflation, and sales in September improved slightly versus August, which is a good sign leading Asos to believe it can still grow share in its home market in FY2022/23. However, this summer will have been propped up by increased demand for new occasionwear and holiday wardrobes, which is unlikely to follow through to next year. It is also under growing threat from the resale market, which GlobalData predicts will grow by another 22% to GBP6.45bn in the UK in 2023, and young consumers are increasingly turning their backs on fast fashion due to sustainability and ethical concerns, as well as a preference for longer-lasting, more versatile clothing. The US has a much more positive outlook after 6.9% retail sales growth last year and 10% revenue growth thanks to expansion of its Nordstrom partnership, particularly for the Topshop brand, and US consumers will also face much softer inflation next year than those in Europe will.

“Asos’ relaunch of Topshop and Topman in September 2022 provides some hope for the retailer, with the new ranges and imagery making the brands feel more reminiscent of their heyday. However, it’s likely that since the brands were purchased by Asos in January 2021, their shoppers have already switched to other players like Zara, particularly those over 30, for which Asos’ core offer does not have as much relevance. The new price structure of Topshop is also more elevated and premium, and it may be challenging to convince shoppers to pay these given the current macroeconomic climate, especially as many may have lost trust in the quality of the products since the acquisition.”

Andrew Busby, retail industry lead at Software AG:    

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“After announcements earlier this week of its post-pandemic financial performance deteriorating and ongoing talks of a formal financial restructuring, Asos’ share prices plummeted. Combine this with GBP32m pretax losses for the retailer, and the future is looking bleaker by the minute. Asos is just one of the brands experiencing ongoing turmoil and as the cost-of-living crisis bites, profits are slumping.  

“Across the industry, we are seeing a significant increase in returns from consumers. To combat this, brands need to consider the ways they can be more transparent about the impact of purchases and returns and take steps to reduce it. That could be something as simple as checkout prompts for those with multiple sizes of the same item in their basket and ensuring photos and descriptions of products are accurately representing what customers are purchasing. That way, any sales a retailer does make, stick.  

“Now, more than ever as household budgets are squeezed, new clothes have become a luxury item. When consumers do decide to treat themselves to a new outfit, handbag, or even pair of shoes, they need to feel a sense of trust in the brands they purchase from.”

Samantha Mansfield, head of strategy experience & commerce, Merkle UK:

“Asos does not go unscathed amid the cost-of-living crisis. Even this giant retailer is no match for the financial struggles tightening the belt on the industry. With share prices plummeting amid ongoing troubles with suppliers, and now with a GBP32m pre-tax loss, the future remains unclear for the retailer.

“Now is the time to revise strategies with the customer in mind. People know times are tough and brands across the board are struggling with sluggish sales and significant increases in returns. What will differentiate brands will be what they create beyond a price tag. Retailers must connect with their audiences, establish relationships based on shared values, and offer enhanced personalised experiences with long-term loyalty in mind.

“Living in a heavily digital world, it’s eye-opening to see that even online retailers who built themselves through the digital age are also struggling. Financial solutions are vital to keep the doors open short-term, but loyalty and experiences are what will make brands flourish and expand into a successful future.”

Melissa Minkow, director, retail strategy at digital consultancy, CI&T:

“Asos’ slowing sales and GBP9.8m yearly loss are less of a reflection on the brand and more of a reflection on the state of the industry overall at the moment. It’s unrealistic to expect impressive numbers when consumers’ finances are so hard-pressed, especially when its younger customer base is being particularly affected by the cost-of-living crisis.

“Additionally, the space Asos plays in has become extremely competitive, and now that consumers have significantly less money available for fashion purchases, the heightened competition here is also an issue.

“With its share price already dropping 11% earlier this week amid plans to restructure its finances, the current crisis is placing the retailer in a precarious position as it balances trying to offset the impact of inflation, with keeping prices reasonable – all while competing for an even smaller pool of consumer spend.”