Despite a significant financial shortfall, Asos is committed to its strategic rebound plan, focusing on key operational changes.
- The retailer has cut its inventory levels by half since 2022 to enhance profitability.
- Asos emphasises full-price sales, moving away from heavy discounting.
- Operational changes are described as “medicinal,” showing initial signs of improvement.
- Plans for a standalone London store are under consideration to boost customer engagement.
Asos, the renowned online fashion retailer, remains optimistic despite reporting a considerable £380 million loss. This optimism stems from a comprehensive strategy aimed at reversing the trend. The company has significantly reduced its inventory levels by 50% from those in 2022, positioning itself to enhance profitability by focusing on full-price sales.
Chief Executive José Antonio Ramos Calamonte regards recent changes as necessary, akin to “medicinal” measures that are currently yielding positive outcomes. These include stricter return criteria and streamlined marketing efforts. While the earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell to £80.1 million from £124.5 million the previous year, improved inventory management and marketing strategies are beginning to show results.
A major write-off of £100 million in old stock and a £141.8 million loss from the closure of the Lichfield warehouse have impacted the figures. However, Asos aims for a 60% growth in EBITDA in the next year, projecting numbers between £130 million and £150 million. Additionally, a 2% increase in average basket values highlights the initial impact of reduced discounting, although active customer numbers decreased by 16% due to less aggressive marketing.
Calamonte stresses that competition from fast-fashion and second-hand platforms like Shein and Vinted is not a primary concern. Asos remains focused on offering the right products at the right time. Financially, the company has strengthened its position through the sale of a 75% stake in Topshop to Bestseller and a £250 million bond refinancing, resulting in a positive cash flow of £37.7 million, a significant increase from the previous year.
Looking ahead, Asos is contemplating opening a standalone store in London. This move is viewed as a strategic effort to increase brand engagement rather than a shift towards omnichannel retailing. Financial analysts are taking note, with Shore Capital adjusting Asos’s rating from “sell” to “hold,” and Peel Hunt acknowledging the company’s improved inventory management and cash flow.
Asos’s strategic focus on inventory management and full-price sales outlines its optimistic path to financial recovery.
