Asos is to write off more than £100m of stock and cut costs after plunging into the red after its annual sales growth almost ground to a halt as shoppers hit by the cost of life slowed down spending on fashion.
The online fashion retailer said it had agreed a £650m bank line to give it “financial flexibility” and aimed to reorganize its operations by cutting costs, improving stock management and ” refreshing the culture” of the business to be more open to new ideas.
The group is also considering selling through other websites in overseas markets or sharing warehouse space with others, in order to reduce costs. He has not ruled out completely exiting some markets.
The changes come after Asos revealed that sales had risen just 1% to £3.94bn in the year to August 21, when they narrowed to a pre-tax loss of £32m from of the profits of 177 million from the previous year. Sales rose 7% in the UK, 10% in the US and 2% in Europe, but sank 9% in other markets. The disappointing overall sales growth came despite sales of the group’s new Topshop brand more than doubling.
The group warned it expected to be loss-making in the first half of its current financial year and said it had amassed almost £153m of net debt compared with a year earlier when it had £200m of net cash.
Shares in the business rose nearly 9% in morning trading after Wednesday’s announcement. The rise follows a fall in Asos shares on Monday after it confirmed it was in talks with lenders to change the terms of a £350m loan line.
José Antonio Ramos Calamonte, Asos’ new chief executive, said the business had become too complex, allowed costs to rise too high and become “too global”, so it lacked scale in the USA, France and Germany.
He also said the group had become too reliant on discounting to attract shoppers as it had not invested enough in building brand awareness or developing new products.
Asos will now buy its stock more frequently and closer to when it goes on sale to ensure it has the right fashion.
Calamonte said annual results were “resilient” but Asos could achieve “much more” and the retailer would “work resolutely to emerge from these turbulent times as a more resilient and agile business”.
He said it was important to make his operations more responsive to changing customer behavior because there was “a lot of volatility” in the way people shopped as they reacted to economic and political events.
Calamonte said Asos, which raised prices by around 4% this year, was “not obsessed with being the cheapest in the market” despite competition from retailers such as China’s Shein, and was more important than the ‘company had the right fashion for sale.
Sign up for Business Today
Get ready for the workday – we’ll tell you all the business news and analysis you need every morning
Privacy Notice: Newsletters may contain information about charities, online advertisements and content funded by third parties. For more information see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply.
He said: “Today, I have set out a clear change agenda to strengthen Asos over the next 12 months and reorient our business for the future. This includes a number of decisive short-term operational measures to simplify the business, together with steps to unlock sustainable long-term growth by improving our speed to market, strengthening our focus on fashion, strengthening our top team and leveraging data and digital developments to better engage customers.”
Asos said sales in the second half of its financial year had been worse than expected as shoppers held back spending on autumn fashion due to the cost of living crisis and also returned more items as they bought tighter fashions than during the pandemic lockdown when stretchy casual wear. was popular
Calamonte said sales of suits and tailoring, both of which likely require more fine-tuning, were more than double last year’s levels.
Yields also rose above pre-pandemic levels in the second half of the financial year as buyers worried about the rising cost of living and bought more under buy-now-pay schemes after”. More sales in Germany, where shoppers are more likely to send unwanted items, also boosted the numbers.
Despite profits being hit by handling returned goods, Calamonte said Asos was not considering charging for returns, unlike rival Boohoo.