ASOS improves profit as it updates on turnaround strategy

ASOS made strategic progress in FY25 despite lower-than-expected sales, as it focused on building profitable and resilient foundations through its multi-year turnaround strategy.

The online fashion retailer said its financial performance in FY25 reflects the success of its strategic initiatives, with its gross profit margin rising by 350 basis points year-on-year.

Operational and cost efficiencies also delivered meaningful improvements, particularly across the supply chain.

However, profitability improvements were achieved amidst lower sales, with group revenue slightly below consensus estimates. The company continues to focus on higher-quality sales against a "soft consumer backdrop."

Most analysts had forecasted a year-on-year group revenue decline of 8.4%.

Adjusted earnings before interest, tax, and other costs are expected to have increased by more than 60% year-on-year.

The retailer added that it successfully cleared excess stock in FY25, reduced its warehouse footprint, and strengthened its balance sheet to improve capital allocation.

It also transitioned to a more "agile" operating model - from how it designs and buys products to how it manages stock freshness and returns - to drive healthier full-price sales.

As part of this, ASOS is taking a more targeted approach to its customer proposition by market. This includes a disciplined, company-wide review and subsequent renegotiation of key supplier contracts, along with a structural reset of its fixed cost base to support its new model - creating the headroom to reinvest in growth.

Together, these changes aim to establish a higher gross margin and a stronger, more profitable underlying economic model that ASOS can grow sustainably.

In a new trading update today, the retailer said it had "essentially completed phase one" as it entered FY25, having significantly reduced and refinanced its net debt at the beginning of the year. It also reduced its inventory position by more than 60% since the end of FY22 (from £1.1 billion to £400 million).

In addition, ASOS explored further opportunities to reduce fixed costs and optimise variable costs, while remaining focused on securing an even stronger profitability foundation to deliver further material cost base improvements in FY26 and beyond.

Over the summer, ASOS then pivoted to the final phase of its transformatio - to "re-engage customers" - launching the first in a series of new customer experiences.

These include an exclusive adidas x ASOS collaboration, the launch of the ASOS.WORLD loyalty program in the UK, and the expansion of Topshop and Topman through new channels - with "positive early signs" of customer engagement.

Looking ahead, ASOS said that building customer love is the primary focus for energy, investment, and resources in FY26.

"ASOS enters this exciting phase of its transformation with a business model, stock profile and underlying cost base that positions it to succeed, with more new customer experiences to come", the retailer said in a statement.

The news follows the recent appointment of Ben Blake as Executive Vice President for Customer & Commercial - a newly created role that consolidates ASOS’s customer and commercial functions into one team.

The move is designed to sharpen the company’s focus on delivering a “seamless and engaging” customer journey while aligning commercial performance with its strategy for sustainable, profitable growth.