Asos eyes return to progress below new boss as losses widen

Forecast: ASOS expects earnings growth of at least 60 per cent in the current fiscal year

Asos has assured investors it expects earnings growth of at least 60 per cent this year after suffering another hefty annual loss.  

The online fast-fashion retailer forecasts adjusted earnings before nasties will total £130million to £150million for the 2025 fiscal year, helped by gross margins rising to over 46 per cent.

Under a turnaround plan, the group has slashed inventory levels in half since 2022 and prioritised profitable sales by selling fewer goods at discounted prices.

It accumulated burdensome stock levels during the early part of the Covid-19 pandemic, when e-commerce sales soared amid trading restrictions on clothes stores.

Since lockdown curbs ended, the company’s sales have slumped as customers returned to shops, cost-of-living pressures intensified, and competition from rivals like Chinese firm Shein increased.

Asos’s turnover shrank 18 per cent to £2.9billion in the year ending 1 September, with UK like-for-like revenues falling by 12 per cent to £1.55billion.

Meanwhile, US sales plunged by 28 per cent to £338.8million, which the firm said partly reflected the ‘more restrained approach’ to paid advertising.

As a result, the London-listed firm recorded a £126million adjusted pre-tax loss, a 79 per cent jump on the previous 12 months.

On a statutory basis, its pre-tax losses expanded by 28 per cent to £379.3million as it also recorded costs related to stock write-offs and the mothballing of its Lichfield fulfilment centre.

Despite this, José Antonio Ramos Calamonte, chief executive of Asos, said the business achieved its ‘key priorities’ during the period, including stock reductions and positive free cash flow.

He added: ‘Our product is now in the strongest position it has been in years, with the right level of newness to excite customers, and we have fundamentally improved our profitability through a relentless focus on operational efficiency.’

Asos shares still fell by 6.9 per cent to 350p on Tuesday morning, having already plunged by over 90 per cent since 2021.

Founded in 2000, Asos’s primary target market is young adults, a demographic disproportionately impacted by recent inflationary pressures.

To bolster its finances, the group sold its 75 per cent stake in Topshop and Topman to Danish firm Heartland, the largest shareholder in ASOS, as part of a joint venture deal.

However, Julie Palmer, partner at Begbies Traynor, still believes the firm ‘has a lot more to do to allay concerns’.

She said: ‘Unless the online-only retailer can adapt to the latest consumer trends, offer compelling value and differentiate itself in a crowded market, its performance will remain on shaky ground.

‘Consumer confidence is likely to stay suppressed after last week’s budget, so Asos must find a way to reconnect with its cost-conscious audience if it is to reclaim a leading position in the ever-evolving online retail market.’