Asos sticks to full-price sales focus as it plunges £300m into the red
ONLINE fashion giant Asos plunged nearly £300 million into the red in the first half of the year as it moved to slash costs in response to slumping sales.
The London-founded business popular with young fashion fans which owns brands including Topshop and Miss Selfridge said revenue in the six months to February 28 dropped 8% to £1.8 billion while UK sales were down 10%.
Shares in the former stock market darling tumbled 9%, or 57.2p, to 578.6p this morning. They are down by almost half over the past year.
A plan by new boss José Antonio Ramos Calamonte that saw less discounting and more full-price items was among factors that hit sales, alongside “a challenging trading backdrop”.
Ramos Calamonte, who has led the FTSE 250 company since June 2022, told the Standard: “Demand has returned to more normal pre-Covid conditions [compared with the pandemic booming online market], shoppers are facing the cost of living crisis and some are taking longer to decide on purchases.”
He added that unpredictable weather had also hit some sales, though outerwear had unusually seen double-digit growth in May so far.
The boss previously launched a £300 million cost saving plan for the 12 months to August 2023. Measures include removing 35 unprofitable brands from the website, reducing office space and closing three warehouses. That has led to a number of one-off costs. An adjusted loss before tax of £87.4 million was recorded compared with a profit of £14.8 million in the same period last year. But write-offs and closure costs drove the bottom line loss to £290.9 million.
The firm said it will retain its focus on profitable sales in the second half and “its commitment to exit the year with a cleaner inventory position”.
Ramos Calamonte said: “I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond.”
A note from analysts at Peel Hunt said the first half figures “represent the nadir for Asos in terms of losses, net debt and expectations”.
Julie Palmer, a partner at Begbies Traynor, said: “Today’s almost £300 million loss might seem like yet another blow but it’s one the market was braced for. Asos had previously warned much of this dive deeper into the red would come from writing off unwanted stock which hasn’t sold and is clogging up the company’s distribution chain, with inflation and other rising costs also big contributors.”