- The online retailer has been trying to clear around £1.1bn of excess stock.
- Asos saw its pre-tax losses rise nine-fold to £296.7m last year.
- Its turnover also fell 10% to £3.55bn amid cost of living pressures.
Clearance: Struggling online retailer ASOS has been trying to clear around £1.1bn of excess stock.
Asos has warned sales could fall by a further 15 per cent in 2024 as it posted much larger annual losses amid weak consumer retail.
The struggling online retailer has been trying to clear around £1.1bn of excess stock under a turnaround plan led by chief executive José Antonio Ramos Calamonte.
It said the remaining excess inventory is expected to be liquidated by the end of the current fiscal year, having already reduced it by 84 percent in the 12 months ending September 3.
However, this has severely affected its revenue and profits, which increased more than nine-fold to £296.7 million before tax last year.
Profitability was affected by a £133.2m stock write-down programme, as well as costs arising from reduced warehouse and head office space.
Meanwhile, turnover fell 10 per cent to £3.55bn as cost-of-living pressures led its young consumer base to cut back on their clothing purchases, and the lack of Covid-related restrictions continued to attract customers back to high street outlets.
Revenue in the UK was further hit by bad summer weather and deep discounts from rivals, who are also trying to clear excess stock.
The London-based company expects total sales to fall by a further 5 to 15 percent in fiscal 2024, with operations remaining subdued through the first half before returning to growth in the final quarter.
After this announcement, asos shares fell 9.1 per cent to 359.5 pence on Wednesday morning, meaning its value has fallen by more than 99 per cent since March 2021.
Despite the warning, Calamonte said 2023 had been “a year of good progress for Asos in a very challenging environment”.
It noted that the company had reduced its inventory levels by about 30 percent, strengthened its balance sheet by refinancing and removing profit-based clauses, and had “significantly improved” its core earnings.
However, net debt more than doubled last year to £319.5m, while the group faces fierce competition from entrants such as Shein.
Asos reportedly wants to sell the Topshop brand, having bought it just two years ago from Sir Philip Green’s collapsed Arcadia retail empire, to Ted Baker owner Authentic Brands Group.
The company valued the brand’s assets, which include Topman and Miss Selfridge, at £265 million in its most recent annual report.
Julie Palmer, partner at corporate restructuring specialist Begbies Traynor, said: “It could be that this trading environment is pushing the retailer to shore up its balance sheet by offloading assets as quickly as its unwanted clothing.”
“Management emphasizes that its change agenda provides solid foundations for a ‘back in fashion’ shift, but it will be a difficult road ahead as inflation eats up more disposable income and customers spend less.
“Unfortunately, removing the dead items may not be enough to get this business back on track.”