Despite a significant decline, optimism remains for Asos’s future.
- Asos reported an 18% drop in UK orders, reflecting challenging market conditions.
- CEO José Antonio Ramos Calamonte remains confident in Asos’s current strategy.
- Asos has implemented new processes to improve stock efficiency and reduce costs.
- The retailer faces increased competition but remains focused on growth opportunities.
Asos has faced a challenging financial year, with its revenue dropping by 18% to £2.9 billion and an operating loss of £331.9 million due to weakened consumer demand and stiff competition from more affordable fast fashion etailers and online resale platforms. The publication of these results led to a 6% decline in share prices.
Amid these financial difficulties, CEO José Antonio Ramos Calamonte is optimistic about Asos’s future, expressing confidence in the company’s online-only business model. He dismissed claims of a potential return to physical Topshop stores, despite suggestions of possible strategic shifts.
On 5 September, Asos announced the sale of a 75% stake in Topshop and Topman for £135 million, creating a joint venture with Heartland. Asos will retain a 22.5% stake, while US department store chain Nordstrom continues to hold the remaining 2.5%. This transaction is expected to conclude in the final quarter of 2024.
Ramos Calamonte emphasized the company’s policy of reevaluating its strategies daily, noting that a future physical presence remains a possibility if it aligns with growth objectives. Moreover, Asos has revolutionised its inventory management with a ‘test and react’ drop-shipping model, successfully reducing its stock from nearly £1.1 billion in 2022 to £520 million. This approach has also led to the clearance of 60 million units, transforming stock into cash.
Asos has notably achieved its year-end target by ensuring 10% of all products across its in-house brands are produced using this model, which constitutes nearly half of its sales. This shift, Ramos Calamonte claims, is already yielding tangible benefits and reinforcing his belief in Asos’s strategic path.
In an effort to improve return rates, Asos introduced a £3.95 charge for select repeat returners, which has already resulted in a 1% decrease in returns within four weeks. Although the market remains unpredictable, consumer confidence has improved during the peak trading season compared to the previous year.
Preparing for a rise in demand for occasionwear ahead of the festive period, Asos has shifted its emphasis towards ready-to-wear, aiming to appeal to a broader demographic, from teenagers to older millennials. Despite impending rises in National Insurance paid by businesses, Ramos Calamonte considers these to be minor compared to other business challenges, asserting that the company continues to manage cost pressures effectively.
Asos remains committed to its strategic initiatives, confident that continued adaptation will drive future success.
