ASOS dips into a loss after weaker than expected H2 performance
ASOS posted a reported loss of £31.9 million on sales up just 1% to £3.94 billion in the year to 31 August 2022 after is performance in the second half of the year was weaker than expected, particularly in international markets.
The online young fashion giant had given guidance of the results last month and its new CEO José Antonio Ramos Calamonte has today set out "a clear change agenda to reorient the business towards the future".
Sales in the UK were up 7% and 10% in the US during the period while Europe was up 2% with the rest of world down 9%. Total sales growth was 4% (1% on a reported revenue basis) with an adjusted profit before tax of £22.0m (adjusted PBT margin of 0.6%).
The reported loss of £31.9m was stated after £53.9m of adjusting items. Adjusted earnings before interest and tax (EBIT) were £44.1m representing an adjusted EBIT margin of 1.1%, a 420bps decline year-on-year.
Ramos Calamonte described the UK performance as "resilient" against an "incredibly challenging" economic platform. His change programme "includes a number of decisive, short-term operational measures to simplify the business, alongside steps to unlock longer-term sustainable growth by improving our speed to market, reinforcing our focus on fashion, strengthening our top team and leveraging data and digital developments to better engage customers."
He added: "In the UK, ASOS is a strong business with a high contribution margin, supported by a fully automated and efficient warehouse footprint. Brand awareness is strong and we have built a highly relevant and locally tailored product offer that resonates strongly with our 8.9m UK consumers, of which 1.9m are Premier customers. On average, our UK customers shop every second month on the ASOS platform, with Premier customers shopping more than double that frequency.
"Outside the UK, however, I see a significant need to improve the way we operate to unlock the opportunity of our global reach. In recent years, the quest for growth has resulted in ASOS becoming excessively capital intensive, too complex and overstretched globally, which has resulted in a lack of meaningful growth and scale in its key international markets of the US, France and Germany.
"While the international business makes a positive contribution and there are pockets of strength in key territories, we are disappointed in our performance, given the extent of our historical capital investment, particularly in the US. This investment in a large, multi-region supply chain network has increased cost and complexity, not fully offset by delivery incomes. With this in mind, we will revisit our approach to resource and capital allocation to ensure a focused approach."
One of the key areas for improvement, identified by Ramos Calamonte, is improved marketing to drive further customer acquisition. He said ASOS had underinvested in marketing relative to its peers and that spend had not been effectively prioritised to ensure return on investment. Performance marketing had sucked up more than 80% of budgets leaving little for longer term brand awareness.
He said he would also focusing on shortening the business's buying cycle to provide a more curated offer and reduce stock held in its warehouses and that it would take a "differentiated" approach to stock clearance moving forward, which prioritised "off-site" channels rather than excessive on-site mark-downs. In FY23 it expects to write off stock to the tune of £100m-£130m to avoid clogging up its warehouses with dead stock.
On the supply chain side he promised he would be "optimising our cost base, improving supply chain efficiencies, and eliminating excess costs through increased controls".
Ramos Calamonte, a former Inditex executive, was appointed to ASOS top job in June, replacing Nick Beighton who left last autumn and is now CEO at luxury retailer MATCHESFASHION.com.
More analysis on today's results to come.
