Pandemic darling Asos reported a further decline in UK sales this morning, with the fast fashion flagship’s boss insisting the firm was making good progress on a turnaround plan.
UK sales slipped eight per cent year on year in the four months into December 31, with the firm blaming “weak consumer sentiment.”
Fast fashion firms, including Asos and Boohoo, have fallen out of favour with investors as lockdown-era growth has not translated into post-pandemic profitability.
Asos said Royal Mail strikes and “disruption in the delivery market” in December had also led to earlier cut-off dates for Christmas and New Year shipping, depressing festive sales.
The 8 per cent UK slide is also impacted by the relative strength of the period last year, when Omicron fears gave a boost to online retail.
Overall revenue totalled £1.4bn in the last four months of the year when Russian sales were excluded, down 3 per cent year on year. The firm exited its Russian operations in the wake of the Kremlin’s attack on Ukraine in March 2022.
So-called active customers were flat year on year at 25.5m.
Charlie Huggins, Head of Equities at Wealth Club, said Asos’ recent “operational performance has left a lot to be desired.”
“Clearly it is going to take time for these actions to bear fruit, but at least the group is now heading in the right direction. One thing’s for sure – it won’t be a quick fix and ASOS has a mountain to climb to rediscover its former glory,” he continued after this morning’s update.
Boss Jose Antonio Ramos Calamonte told markets that the plan to turnaround Asos – whose shares are down some 74 per cent from this time this year after a host of profit warnings – was on track.
Asos said it was “confident” that it would see “significant improvement in profitability” in the second half of the 2023 financial year. It expects cash outflow of £100m-£0 this year, in line with previous guidance.
“We are undertaking necessary strategic and operational changes, with our focus shifting from prioritising top-line growth to building a more relevant and competitive fashion business with a disciplined approach to capital allocation and ROI,” he said in the firm’s update to markets this morning.
“We have made good early progress against a number of measures to simplify the business, including re-positioning our inventory profile, reviewing our operational model in our top markets and reducing our cost base. While there is more to do, I am pleased by the progress made in this period and am confident in the direction we are going,” he continued.
Asos confirmed that cost-cutting measures include the winding down of three ‘ancillary storage facilities’ in the second half of this year, “rationalising” office space and removing 35 unprofitable brands from the Asos platform by the end of the first half of this financial year.