Asos eyes return to growth under new boss as losses mount

Asos has assured investors it expects profit growth of at least 60 per cent this year after suffering another sizeable annual loss.

The online fast fashion retailer forecasts adjusted pre-discount profits to rise to £130m to £150m by fiscal 2025, helped by gross margins rising to more than 46 per cent.

Under a recovery plan, the group has halved inventory levels from 2022 and prioritized profitable sales by selling fewer products at reduced prices.

It built up burdensome stock levels during the early part of the Covid-19 pandemic, when e-commerce sales soared amid trading restrictions at clothing stores.

Since lockdown restrictions ended, the company’s sales have plummeted as customers returned to stores, cost-of-living pressures intensified and competition from rivals such as Chinese firm Shein increased.

Asos’s turnover fell 18 per cent to £2.9bn in the year to September 1, and like-for-like UK revenue fell 12 per cent to £1.55bn.

Meanwhile, US sales fell 28 per cent to £338.8m, which the company said partly reflected the “tighter focus” of paid advertising.

As a result, the London-listed company posted an adjusted pre-tax loss of £126 million, an increase of 79 per cent on the previous 12 months.

On a statutory basis, its pre-tax losses rose 28 per cent to £379.3 million as it also recorded costs relating to share write-offs and the suspension of operations at its Lichfield logistics centre.

Despite this, José Antonio Ramos Calamonte, chief executive of Asos, said the company achieved its “key priorities” during the period, including stock reductions and positive free cash flow.

He added: “Our product is now in the strongest position it has been in years, with the right level of newness to excite customers, and we have fundamentally improved our profitability through a relentless focus on operational efficiency.”

asos shares It still fell 6.9 per cent to 350 pence on Tuesday morning, having already fallen more than 90 per cent since 2021.

Founded in 2000, Asos’ primary target market is young adults, a demographic disproportionately affected by recent inflationary pressures.

To shore up its finances, the group sold its 75 percent stake in Topshop and Topman to Danish firm Heartland, ASOS’s largest shareholder, as part of a joint venture deal.

However, Julie Palmer, partner at Begbies Traynor, still believes the company “has much more to do to allay concerns”.

She said: ‘Unless the online-only retailer can adapt to the latest consumer trends, offer attractive value and differentiate itself in a crowded market, its performance will remain shaky.

“Consumer confidence is likely to remain depressed after last week’s Budget, so Asos must find a way to reconnect with its cost-conscious audience if it is to regain a leading position in the online retail market. constantly evolving.”