Asos insists turnaround is working despite £380m loss

The boss of Asos has insisted that the “medicinal” actions it has taken over the past two years are finally beginning to soothe its ailments and stop weighing on profits.
The online fashion retailer aimed at twentysomethings struck an upbeat tone as it announced that it had halved inventory levels since 2022 and sold more full-price goods, as part of its strategy to boost profitability.
Asos said it expected further margin improvements to drive 60 per cent growth in earnings before interest, taxes, depreciation and amortisation (ebitda) to between £130 million and £150 million in the new financial year.
Shares in the business still fell 6.9 per cent to 350p, however, as the strategic actions it took weighed on the latest income statement.
The London-listed company reported ebitda — its preferred measure of profitability — of £80.1 million in the year to the beginning of September, down from £124.5 million the year before.
Losses before tax widened to £379.3 million during the year, compared to a loss of £296.7 million last year, owing to a £100 million write-off in old, unwanted stock and a £141.8 million writedown on the closure of its Lichfield warehouse, which was announced last November.
Group full-year revenue declined by 16 per cent on a like-for-like basis to £2.9 billion, in line with guidance given in its September trading update, as it discounted less and focused on driving full-price sales.
Despite this José Antonio Ramos Calamonte, chief executive of Asos, said the business achieved its “key priorities” during the period, which also included having stricter criteria on returns and more disciplined marketing.
“The medicine we have taken — reducing our intake, discounting to clear old stock and rigorously revising our operations — while necessary, has not made for attractive financial results over the last two years,” he said. “However, we are confident now have the right team, processes and business resilience on which to drive sustainable, profitable growth.”
He added: “We have already seen the green shoots in the performance of our new stock in the recent months, which give us confidence that our new commercial model is delivering customers the right products at the right time.”
Calamonte laid out a turnaround plan for Asos in October 2022 amid a slowdown in demand following the online pandemic boom. It also faced increased competition from the likes of Shein, the Chinese-founded fast-fashion group, and competitors such as Vinted and Depop selling secondhand clothes.
A former stock market darling, Asos was briefly valued at over £6 billion in 2018 — more than Marks & Spencer or Next. But the shares have since fallen by more than 95 per cent; shares in Next have risen by 108 per cent in the same period.
At the beginning of Asos’s turnaround plan, its stock levels had doubled to more than £1 billion, largely owing to Covid-related disruptions and poor commercial practices.
Over the past two years, Asos has halved stock levels to £520 million and about 80 per cent of its current fashion stock has been on the website for less than six months.
Asos had already written off more than £100 million of stock in 2022. A large proportion is understood to have been sold on internally, via its sample sale website. Calamonte said the company had “not shipped [that stock] to be burnt. We don’t do that or send it to landfill.”
Asos said that as a result of stock reduction its sales of “newness” had increased by 24 per cent year-on-year over the past three months. Average basket value is up 2 per cent to £41.07 for the full year. However, active customer numbers were down by 16 per cent, largely owing to reduced marketing and discounting.
Calamonte shrugged off concerns about fast-fashion and second-hand rivals such as Shein and Vinted stealing spend and market share. “The market leaders have [between 4 and 6 per cent] market share, which means that there is enough space for everybody provided you do a good job. So, we are not worried about Vinted or about anyone else out there. We are worried about ourselves.”
Asos, which counts Mike Ashley’s Frasers Group as a shareholder, said it was feeling confident about the all-important Christmas trading period and the year ahead, despite operating in a “volatile” market.
It said it would continue to focus on profitability, instead of revenue growth in the year ahead, as that would “not be in the long-term interests of the business”.
Asos’ chief financial officer, Dave Murray, said tax hikes announced in last week’s Budget would not change its full-year guidance.
“We are going to see a small increase in our cost base, but we will manage that within just the realm of having the progress to [the 2025 financial year,” he said. “It is a sum, but it’s not a significant sum.”
In September Asos offloaded a 75 per cent stake in Topshop to a group controlled by Anders Povlsen, the billionaire who is Asos’s biggest shareholder, and announced a £250 million bond refinancing to help to strengthen its balance sheet.
Asos said the Topshop deal would have £10 million to £20 million negative adjusted ebitda “impact” in its first year of operation but would be “increasingly ebitda accretive over time”.
It expects cash flow to be broadly neutral, with capex of about £130 million and cash interest of £35 million. The company reported free cash inflow of £37.7 million in the current financial year, a £250.7 million improvement year-on-year.
Peel Hunt said the company had “succeeded in clearing stock, securing the balance sheet and moving the business on to an even keel. The strategy now is product-led recovery, as Asos seeks to drive frequency, active [customers] and ultimately revenue.”
Shore Capital, the broker, upgraded its rating from “sell” to “hold”, following “balance sheet actions which provide near-term liquidity and the improved profit outlook”. It said that “as the group focuses on more profitable sales, we start to see the impacts of this strategy emerge, with average basket value up 2 per cent.”
Asos mulls store opening
Asos’s chief executive has said he would not rule out opening standalone shops if it “made the business model stronger”.
The Times understands that the online fashion retailer has been mulling a London-based Asos store, which could house a large number of its brands.
Calamonte said that opening an Asos store was an “option”, adding that the company was “always flexible and we are always open to anything that makes our business model stronger. If having one store could make our business model stronger, we would consider it.”
Asos opened its first “pop-up” temporary store last year in Rathbone Place in central London.
Calamonte said he recognised that having a physical store presence had the ability to “create better connections with our consumers”, adding that there were “no sacred cows” in how the brand reached customers.
However, he said that Asos would be unlikely to expand into bricks-and-mortar as a major business line. “We are not thinking about changing our business model and becoming an omnichannel retailer by no means.”
The company revealed plans earlier this year to boost Topshop’s presence, which could involve physical retail space through its new joint venture with Bestseller, a fashion group controlled by the Asos shareholder Anders Povlsen.
Calamonte said: “Obviously with the agreement of our partner in a joint venture, we will not ignore any option to grow, and if that option in the future might include physical presence it’s certainly not discarded by no means.”