Asos has posted a half year loss as the fashion retailer continues to be beaten by a tough economic climate and a slowdown in consumer spending, with its share price down over five per cent when markets opened this morning.
The FTSE 250 retailer, which sells its goods exclusively online, said it had made an adjusted loss before tax of £87.4m during the six months ending 28 February, compared to a profit of £14.8m the same period last year.
Asos told investors revenue declined seven per cent in the first six months to February falling to £1.84bn compared to £2bn in the same period last year.
However, the brand, which has struggled to keep up the momentum of its lockdown growth, said that the dip in earning reflects “deliberate actions” by the group to boost profitability.
These actions included reduced markdowns and enacting a discipline on “marketing spend” – which the group previously hinted at in its turnaround plan called ‘Driving Change’.
José Antonio Ramos Calamonte, chief executive of Asos remained hopeful about the cost cutting initiative with the plans reportedly on track to bring in a return to profitability in during the second half of its 2023 financial year.
Calamonte said.: “More than 95 per cent of the circa £200m of benefits expected in H2 FY23 are based on initiatives already in place.”
Asos ‘difficult period’
José Antonio Ramos Calamonte, chief executive of Asos, said: “While some of these changes have impacted short-term sales growth, there are many causes for optimism as we progress through the second half of the year.
“We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile, and are taking action to reduce the proportion of our sales which are not profitable”
Sarah Riding, retail partner at Gowling WLG, said: “It’s been a difficult period for ASOS, having been hit hard by the cost-of-living crisis, rising inflation and changing consumer trends post-pandemic. However, the business’ turnaround plan under chief executive, José Antonio Ramos Calamonte, could help it to get back on track.
“The plan has seen the company scale back on its discounting to reduce the pressures of rising costs as it looks to write off a significant amount of its inventory to tackle the increase in customers returning products. Also, a reshuffle in senior leadership with the appointment of two new non-executive directors should bring in some fresh ideas and strategies to enhance the online retailer’s offering and strengthen its growth.”