ASOS remains hopeful for recovery despite a substantial financial setback.
- The retailer has halved its inventory since 2022 to enhance profitability.
- ASOS has pivoted its strategy towards full-price sales to improve margins.
- Stricter return policies and streamlined marketing efforts show promising outcomes.
- The company’s balance sheet is bolstered by strategic asset sales and refinancing.
ASOS has experienced a notable financial loss of £380 million; nonetheless, the company remains positive about its path to recovery. By reducing its inventory levels by half since 2022, ASOS aims to increase its profitability. The focus has now shifted to full-price sales to boost margins, marking a significant change in strategy.
Chief Executive José Antonio Ramos Calamonte referred to the recent modifications as ‘medicinal.’ Measures such as tightening return criteria and refining marketing strategies are reported to yield promising results. As evidence of these efforts, ASOS’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at £80.1 million. This figure, however, reflects a decrease from the previous year’s £124.5 million, largely due to a £100 million write-off in outdated stock and losses of £141.8 million from closing its Lichfield warehouse.
Despite these setbacks, ASOS has ambitious plans for the future, seeking a 60% growth in EBITDA next year with targets set between £130 million and £150 million. The retailer notes an increase in average basket values by 2% year-on-year, although the number of active customers has dropped by 16%, attributed to less aggressive marketing tactics.
Calamonte expressed that competition from fast-fashion and second-hand platforms like Shein and Vinted is not a major concern for ASOS. The company’s priority remains on providing the right products at the right time for its customers. Moreover, the recent sale of a 75% stake in Topshop to Bestseller and a £250 million bond refinancing have significantly fortified ASOS’s financial position.
Maintaining a positive cash flow of £37.7 million this year signifies an improvement by £250.7 million from the last year. ASOS is also exploring the potential of opening a standalone store in London to enhance brand interaction, though this is seen solely as a strategic move rather than a shift towards omnichannel retailing.
Additionally, ASOS’s improved balance sheet and profit outlook have led to an upgrade in the company’s rating by Shore Capital from ‘sell’ to ‘hold.’ Peel Hunt has commended ASOS for its effective inventory management and cash flow advancements.
ASOS continues to implement strategic changes, focusing on recovery and profitability, despite recent financial challenges.
