Asos posts first half loss
Online fashion retailer Asos has posted an adjusted pre-tax loss of £87.4 million in the first half of its financial year compared to a profit of £14.8 million a year earlier
In the six months to 28 February, the retailer’s revenue declined by 10% on a constant currency basis to £1.84 billion. Asos attributed the fall to challenging trading conditions and its Driving Change initiatives to improve profitability. These included reducing the number of markdowns, tight control of marketing spend and country-specific proposition changes. The retailer has also reduced the breadth of its assortment as as part of plans to right-size stock.
Asos said the actions have accounted for around 50% of the revenue decline since December, but are driving improving order economics.
Meanwhile UK sales were down 10% year-on-year in the period while sales in Europe were flat. Looking at the US and the rest of the world, sales fell by 7% and 12% respectively.
José Antonio Ramos Calamonte, chief executive of Asos, said: “Our focus is on improving our core profitability, prioritising order economics over top-line growth and I am pleased with the strategic and rapid operational progress the business has made in the first half of the financial year, against some very challenging trading conditions.
“Thanks to the hard work and commitment of our teams, we have accelerated the roll-out of our new commercial model, delivered more than £100 million of profit optimisation and cost saving initiatives, extended our financing facility and continued to build out our top team while remaining committed to our Fashion with Integrity agenda.
“Taken together, these measures will create a more sustainably profitable and cash generative business as we reinforce our position as a leading destination for our fashion-loving customers.”
Giving an update on more current trading, Asos said its second quarter sales momentum has broadly continued into March and April with approximately half of a sales decline driven by the planned Driving Change initiatives. However, adjusted gross profit was broadly flat year-on-year due to the prioritisation of profitability over growth.
Calamonte added: “We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile, and are taking action to reduce the proportion of our sales which are not profitable. Initiatives are in place to drive a further c.£200 million of benefit in the second half and I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond.”