ASOS remains hopeful for a financial turnaround despite significant yearly losses, focusing on strategies that enhance profitability.
- By halving inventory since 2022, ASOS aims to improve profitability with a focus on full-price sales.
- Chief Executive José Antonio Ramos Calamonte describes recent strategic changes as “medicinal,” contributing to positive indicators for the company.
- The company experienced a substantial write-off in old stock and a strategic warehouse closure, impacting financial results.
- Despite these challenges, ASOS projects significant EBITDA growth and considers opening a standalone store to boost customer engagement.
ASOS has made substantial adjustments in its operations by halving its inventory levels since 2022. The company is concentrating on full-price sales to enhance profitability. Chief Executive José Antonio Ramos Calamonte referred to these strategic changes as “medicinal,” and the measures, including stricter return policies and streamlined marketing, are beginning to show positive results.
The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at £80.1 million, a decline from £124.5 million the previous year. This decrease is attributed to a £100 million write-off in old stock and a £141.8 million loss linked to the closure of its Lichfield warehouse.
Looking forward, ASOS is targeting a substantial 60% EBITDA growth, aiming to achieve figures between £130 million and £150 million. With reduced discounts, the average value of shopping baskets is up 2% year-on-year, though there has been a 16% drop in active customer numbers due to less aggressive marketing tactics.
Calamonte emphasized that competition from fast-fashion and second-hand platforms such as Shein and Vinted is not a significant concern for ASOS. He reaffirmed the company’s focus on delivering the right products at the right time.
A notable operational move included the sale of a 75% stake in Topshop to Bestseller, owned by major shareholder Anders Povlsen, alongside a £250 million bond refinancing, which has strengthened ASOS’s balance sheet. This year, the company reported a positive cash flow of £37.7 million, marking an improvement of £250.7 million from the previous year.
In terms of future strategies, ASOS is contemplating the potential opening of a standalone store in London to enhance customer engagement. Calamonte suggested that this move would serve to strengthen brand connections rather than signify a shift towards omnichannel retailing.
Financial analysts have responded positively to ASOS’s strategies, with Shore Capital upgrading the rating from “sell” to “hold,” and Peel Hunt commending the improvements in inventory management and cash flow.
Though ASOS faces challenges, strategic measures and strong financial planning indicate a positive outlook for recovery.
