Asos's losses shrink, with top executive affirming turnaround strategy amid declining sales revenue
Asos's New Strategy Yields Promising Results
Amidst a turbulent landscape for fast-fashion retailers, Asos's CEO José Antonio Ramos Calamonte insists that the company's fresh commercial approach is bearing fruit, reporting a notable decrease in half-year losses despite a 14% slump in revenue to £1.3 billion.
The renowned Miss Selfridge owner, in the midst of a prolonged revitalization plan, saw pre-tax losses shrink from £28.5 million to £241.5 million for the six-month period ending March 2nd. However, the sales decline wasn't all smooth sailing; European sales dipped 19%, and US sales dropped a staggering 30%, following the introduction of initiatives geared towards boosting profitability. Fortunately, UK revenues only decreased by 6%, with reduced discounting rates bolstering average basket values.
The London-based firm has made significant strides by slashing its inventory levels by about 60% over the past three years and prioritizing profitable sales. Asos stockpiled excessive inventory following the meteoric surge in online clothing sales during the initial phase of the Covid-19 pandemic. However, post-lockdown, sales slowed dramatically, and stockpiles started dwindling as consumers resumed in-store shopping and faced competition from Asian rivals like Shein and Temu.
Despite the challenges, there are glimmers of hope. Gross margins improved by a considerable 5.1 percentage points to 45.1%, thanks to a higher mix of full-price sales and decreasing markdown activity. Moreover, the company's adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) transformed from a £16.3 million loss to a £42.5 million profit.
Ramos Calamonte expressed confidence in the strategy, stating, "Customers are responding positively to our focus on full-price sales, speed to market, and quality...and positive momentum with our partner brands." He also affirmed the company's commitment to maintaining a minimum gross margin of 46% and aiming for an adjusted EBITDA growth of 60% between £130 million and £150 million for the full year.
However, Asos must contend with potential repercussions from President Donald Trump's proposed tariffs on countries like China, India, and Bangladesh, where many of the company's suppliers are based. Despite these obstacles, investors remain somewhat optimistic, perhaps even buoyed by the tangible signs of progress in Asos's transformation.
Enrichment Data:
- Asos's turnaround plan is showing clear signs of progress, with significant improvements in financial performance reported for the first half of fiscal year 2025, despite ongoing challenges in sales.
- The company reduced its pre-tax loss to £241.5 million for the 26 weeks ending March 2, 2025, down from a £291.1 million loss in the same period the previous year, marking a substantial narrowing of losses.
- Total revenues decreased by 13% year-on-year to £1.3 billion, continuing a downward sales trend driven by strategic shifts in customer targeting and market pressures, particularly steep declines in key regions such as the US (-30%) and Europe (-19%).
- Gross margin improved markedly by approximately 490-500 basis points to around 45.2%, driven by a higher mix of full-price sales, fewer markdowns, better inventory health, and tighter operational discipline.
- Asos swung from an adjusted EBITDA loss of £16.3 million in the first half of the prior year to a positive adjusted EBITDA of £42.5 million, representing a year-on-year improvement of about £58.8-60 million.
- The company has optimized its global warehouse network and reduced distribution costs by around 20%, enhancing supply chain efficiency.
- Asos expanded its brand portfolio, adding over 25 new brand partners and plans to launch many more in the second half of the year.
- CEO José Antonio Ramos Calamonte projected further gross margin improvement (aiming for over 46% for the full year) and adjusted EBITDA growth of 60% from £130 million to £150 million for FY25.
- Asos's profitability improved significantly in the first half of 2022, as reported by CEO José Antonio Ramos Calamonte, with a notable reduction in pre-tax losses and a switch from an adjusted EBITDA loss to a profit.
- The retail business made progress in its turnaround plan, reporting a decrease in pre-tax losses from £28.5 million to £241.5 million for the six-month period ending March 2, 2022.
- The company's focus on profitable sales, speed to market, and quality, along with decreasing markdown activity, contributed to the improvement in Asos's gross margins by 5.1 percentage points to 45.1% in 2022.
- Despite challenges such as steep declines in sales in key regions like the US (-30%) and Europe (-19%), Asos has managed to reduce inventory levels by 60% over the past three years and optimize its global warehouse network to lower distribution costs by around 20%.
- Asos continues to invest in expanding its brand portfolio, adding over 25 new brand partners and planning to launch many more in the second half of 2022, demonstrating hopes for further growth in the retail industry.
