ASOS sales drop by double digits but it’s “readying for a return to profitable growth”

ASOS has recorded revenues down 11% to £3.54bn in the year to 3 September 2023 but the online young fashion giant said it had made good progress on its turnaround plan and was “readying for a return to profitable growth in FY25”.

Loss before tax increased to £296.7m (compared to £264.8m in the prior year) while at and adjusted EBIT level it recorded a loss of £29m. The company pointed out that it had seen a 100% improvement in EBIT in the second half of the financial year. Throughout the financial year it had also reduced its inventory by around 30% and increased its profit per order by more than 30%.

CEO José Ramos Calamonte, who launched the “Driving Change” agenda at the business after his appointment in 2022, hailed “significant operational progress” with 84% of the circa £1.1bn stock carried over cleared through in the year. The new commercial model in H2 also delivered stronger sell-through.

A "Test & React" pilot for high-fashion product produced circa 500 options with lead times of just two weeks while "Partner Fulfils", which enables ASOS to handle the fulfilment of third-parry brand partners, scaled to 33 brands across six markets. The technology is now in place to accelerate the rollout and provide ASOS Fulfilment Services on Direct to Consumer product.

FY24 will herald a "return to fashion" the company said, as it will focus on its strengths, with the final excess inventory due to be "cleansed". The company said it anticipated a futher sales decline of 5% to 15% in FY24, with positive adjusted EBITDA and material cash generation driven by stock sell-through, further reducing net debt.

FY25 will be the year it expects to return to growth with EBITDA margin around pre-COVID levels.

"FY23 was a year of good progress for ASOS in a very challenging environment and I am proud of what the business has achieved. We have reduced our stock balance by c.30%, significantly improved the core profitability of the business, strengthened our balance sheet, and refreshed our leadership team.

"Encouragingly, stock that was brought in under our new commercial model over the summer months has performed strongly and this gives us the confidence to accelerate the rollout of our new processes. As such, we are taking decisive action in FY24 to clear stock brought in under our old model while substantially improving our speed to market and investing in our brand, reminding our customers what we're really about: fashion."

There was no comment made on reports that the business was looking to offload the Topshop brand acquired from the collapsed Arcadia in 2021. It is believed that American group Associated Brands, which owns Ted Baker, among others was interested in picking up the brand and returning it to the high street.