Asos Warned of 18% Drop in 1H Sales, But Also Had Some Good News
Asos Plc said on Tuesday that its strategy to turnaround operations is working.
“Asos is becoming a faster and more agile business, aided by the incredible work of our teams to speed up all of our processes to deliver the fashion, quality and prices that our customers want, when they want it,” José Antonio Ramos Calamonte, CEO, said. “We have reconfirmed our guidance for FY24 as we lay the foundations for a more profitable, cash generative business from FY25 and beyond.”
More from Sourcing Journal
He said the company has made “great progress in monetising inventory that built up over the pandemic and in improving the core profitability of our operations.”
The company said sales fell 18 percent for the first half ended March 3, due to competition and ongoing efforts to “clear aged stock” as the company transitions to a new operating model by Fiscal Year 2025. The good news is that the company is ahead of plan to improve stock efficiency and cut inventory to 600 million pounds ($758.1 million) by year end.
Asos also said it is bringing its fashion designs to market in 2 to 3 weeks, with Test & React tracking 5 percent of company-owned brands. That move provides agility in responding to rapidly evolving customer demand.
Despite the plunge in sales for the half, the company also saw some good news. It said free cash flow improved by 240 million pounds ($303.2 million) versus year-ago levels, helped by improvements in profitability and the clearance of aged stock. Those two factors helped the company close the half with a cash balance of more than 330 million pounds ($417 million). That represented an improvement of more than 20 million pounds ($25.3 million) from the year-ago first half, as well as the firm’s strongest first half cash performance since Fiscal Year 2017.
Also important was that Asos left its full-year guidance unchanged. That guidance includes a “5 to 15 percent sales decline, positive adjusted EBITDA, inventory back to pre-COVID levels, and positive cash generation, reducing net debt.”
Reiterating guidance reflects the company’s confidence that its plan is working, even against increasing competition from other fast-fashion players that include Boohoo and Shein.
The company in November, when it posted fiscal 2023 results, said it would need 12 months to get profitable again. Ramos Calamonte said then that the “benefits of the new model will become clearly visible in our profitability and growth in FY 25 and beyond.”
The company also said in November that it would close its U.K. fulfillment center in Lichfield, essentially mothballing the warehouse to garner an annual cost saving of 20 million pounds $25.3 million) and giving it the flexibility of selling the facility or eventually re-opening it, depending on capacity needs.
Ramos Calamonte joined the company in 2022 as chief commercial officer, and became CEO last June. He has been working with his teams to improve core order profitability, which included ditching unprofitable brands.
Asos last May replaced its $350 million pound ($442.1 million) revolving credit facility that would have ended this November. The new 275 million pound ($347.3 million) facility with Bantry Bay Capital, which expires in April 2026, is comprised of a 200 million pound ($252.3 million) senior loan and 75 million pound ($94.7 million) “super senior” revolving credit line.
