Asos has suffered a significant loss in turnover, down by 18 percent in the first half of its fiscal year. The British pure online player has taken drastic measures and believes that, partly due to faster production processes, it will be able to return to profitability in the next fiscal year.
The turnover of Asos, long hailed as an online growth phenomenon throughout Europe, remained at 1.7 billion euros (1.5 billion pounds) in the half-year period ending early March, several hundred million pounds less than in the same period a year earlier. Pre-tax losses increased by 37 percent to 140 million euros (120 million pounds).
A year of transformation
ASOS has seen British online shoppers return to physical shopping streets and is facing new online competition from companies like Shein from China. It predicted a year of continued transformation “as we take the necessary actions to deliver a more profitable and cash-generating business” earlier.
The company sees the first results of its Back to Fashion strategy, in which ASOS set three priorities for 2024: offering the best and most relevant products, strengthening its relationship with customers, and reducing its cost to serve. “We have delivered on each of these in the first half of the year, including right-sizing our stock ahead of target to drive our best first-half cash performance since 2017.”
The Back to Fashion strategy is paying off.
ASOS speaks of “excellent results” from Test & React, a Shein-like model that fast-tracks new designs to retail them online within three weeks. It is growing at a rapid pace, according to the company that raised 80 million pounds from institutional and retail investors last summer. “ASOS is becoming a faster and more agile business, and we are reiterating our guidance for the full year as we lay the foundations for sustainably profitable growth in FY25 and beyond.”
Reducing stock volume
ASOS’s turnaround plan also focuses on reducing volumes of new stock. The company said it has cut its intake by 30 percent, while selling off a significant volume of old stock that had accumulated during the pandemic at a discount. The company told investors that this was “the medicine it needed to take”.
