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Asos has warned of more pain ahead, predicting a drop in sales next year as it seeks to turn itself round following slowing demand from cash-strapped consumers.
The online fast-fashion company’s pre-tax losses ballooned to almost £300mn in the year to September 3, compared with £31mn the previous year, which included a stock write-off announced earlier this year, and consultancy and restructuring costs. Revenue dropped to £3.5bn from £3.9bn, the UK-based company said on Wednesday.
Asos added that it expected sales to fall between five and 15 per cent in the next financial year, but return to growth in 2025, sending the shares down by almost 11 per cent to 351p in early morning trading. It also expects “positive” underlying profits in 2024 — guidance described as “vague” by analysts at Investec.
The ecommerce retailer, once a darling of the London stock market, thrived during the pandemic thanks to the boom in online sales but has lost more than a third of its value in the past year as it grapples with high levels of stock and slowing demand amid the cost-of-living squeeze. Shoppers also returned to physical stores in greater numbers than expected after the pandemic.
Chief executive José Antonio Ramos Calamonte, who unveiled a revival plan a year ago, hailed the turnaround progress so far including a 30 per cent reduction in stock and efforts to strengthen the balance sheet.
He declined to say whether Topshop was up for sale, having bought the fashion brand as well as the Miss Selfridge label and the activewear brand HIIT in a £330mn deal in 2021 from Sir Philip Green’s defunct Arcadia empire.
Asos published its full-year results on Wednesday, a week later than planned to allow auditors at PwC to complete the process.
“Its 2023 performance paints a mixed picture of its [transformation] strategy, indicating areas that could benefit from focused improvement,” said analysts at Shore Capital. “The second half of the year did register a 100 per cent year-on-year increase in adjusted earnings before interest and taxes and a boost in free cash flow by over £125mn, yet these are mere glimmers in a rather subdued financial landscape.”
Asos also said it would mothball its second UK fulfilment centre in Lichfield, Staffordshire, towards the end of next year, putting “a few hundred” jobs at risk, as it does not need the additional capacity.
Calamonte is seeking to make the fast-fashion player more profitable and generate cash while reducing its inventory.
In May, it raised £80mn from shareholders to strengthen its balance sheet and borrowed a further £275mn from Bantry Bay to give it “financial headroom”.
Meanwhile, Mike Ashley’s Frasers has been upping its stake in Asos in recent months, becoming its second-largest shareholder after Danish billionaire and owner of the Bestseller group Anders Holch Povlsen.
Frasers has also been increasing its stake in online fast-fashion rival Boohoo as part of a quest to have a “world-leading retail ecosystem”, though it is unclear what it hopes to achieve through stakebuilding.
