Asos has announced a significant pre-tax loss, worsened from the previous year.
- Sales dropped by 18%, adding to the financial strain.
- A focus on inventory reduction denotes a key strategic shift for the company.
- The company anticipates future growth through a revamped commercial model.
- A loyalty programme and a new site for Topshop are part of their recovery efforts.
During the fiscal year ending on 1 September, Asos reported a pre-tax loss of £379.3 million. This marks a substantial increase from the previous year’s loss of £296.7 million, compounded by an 18% decline in sales, which totalled £2.9 billion. Despite these challenges, CEO José Antonio Ramos Calamonte expressed optimism, noting the emergence of ‘green shoots’ in performance and asserting confidence in the new commercial model’s capability to deliver the right products at the right time.
Central to Asos’s turnaround is its strategy to cut inventory levels by approximately 50% since the last financial year. This move has allowed the retailer to offer fresher stock, aligning with increased customer demand for newness. According to Calamonte, the focus on operational efficiency has significantly bolstered the company’s profitability, with the product range currently in its strongest position in years.
The retailer’s adjusted EBITDA reached £80.1 million, hitting the upper end of expectations. In recent months, new product sales surged by 24% year-on-year. This was achieved through disciplined stock management, drastically reducing aged stock by about 75% and ensuring over 80% of items are less than six months old. Such measures reinforce Asos’s commitment to revitalising its product offering and improving gross margins.
Looking ahead, Asos plans to expand its ‘Back to Fashion’ strategy, which includes forming partnerships with new brand partners and enhancing customer experiences. An ambitious goal to extend the ‘test and react’ model to 20% of its own-brand sales also features prominently. Furthermore, the forthcoming introduction of a loyalty programme and a standalone website for Topshop are seen as pivotal elements in driving future growth and profit improvements. Calamonte remains optimistic about achieving significant profit boosts in the first half of the fiscal year 2025 and beyond, regardless of revenue levels.
Post-year-end developments have seen Asos further strengthen its balance sheet through a joint venture for Topshop Topman and refinancing efforts. These strategic actions have begun to show promising results, with new product sales rising by 24% year-on-year over the last quarter. Calamonte’s sentiments reflect a sense of accomplishment and energisation from the progress made, as he looks forward to the continued evolution of the business model.
Despite current financial setbacks, Asos is poised for future growth through strategic adjustments and innovative customer engagement initiatives.
