Asos remains optimistic about its financial turnaround, working through a significant £380m loss.
- The fashion retailer has cut inventory by half since 2022, focusing on full-price sales to improve profits.
- Initiatives such as stricter return policies and streamlined marketing are starting to yield positive results.
- Asos anticipates a 60% growth in EBITDA, projecting between £130m and £150m in the coming year.
- The company strengthens its balance sheet with strategic sales and refinancing, alongside plans for a standalone London store.
In a bold attempt to navigate a challenging financial landscape, Asos has halved its inventory levels since 2022, concentrating on full-price sales to enhance profitability. Asos’s CEO José Antonio Ramos Calamonte has described these measures as ‘medicinal,’ referencing the impact of stricter return policies and more efficient marketing strategies. Although EBITDA declined to £80.1 million from £124.5 million, a £100 million write-off of obsolete stock and a £141.8 million loss due to a warehouse closure were significant factors.
Despite these challenges, Asos is optimistic about a strong recovery, forecasting a 60% growth in EBITDA, aiming for figures between £130 million and £150 million next year. This optimism is fueled in part by increased average basket values, up 2% year-on-year, driven by reduced discounts even as active customer numbers fell 16% due to less aggressive marketing.
Competition from fast-fashion platforms like Shein and second-hand sites such as Vinted has not deterred Asos. Calamonte highlighted their focus on delivering the right products at the right time, indicating confidence in the retailer’s market strategy. Moreover, the sale of a 75% stake in Topshop to Bestseller and a £250 million bond refinancing have bolstered Asos’s financial foundation, creating a positive cash flow of £37.7 million this year.
Looking forward, Asos’s consideration of setting up a standalone London store marks a strategic initiative designed to foster deeper customer engagement, rather than a shift towards omnichannel retailing. Financial analysts like Shore Capital have upgraded their ratings for Asos, seeing improvement in both the balance sheet and profit outlook, while Peel Hunt has commended the company for its adept inventory management and improved cash flow.
Asos is navigating its financial struggles with strategic decisions, aiming for a solid turnaround and future growth.
