1st Nov 2023 14:09
(Alliance News) - Asos PLC shares were down on Wednesday, as the online fast-fashion retailer continues to struggle after its "heyday" during the Covid pandemic.
Its annual loss widened as revenue fell by double digits, but Asos expects a slow return to growth.
"Asos is battered and bruised," said AJ Bell investment director Russ Mould.
"So much for ASOS being a disruptor in the fashion industry. Its fifteen minutes of fame have long gone, and the business is now having to rethink its strategy."
Shares in Asos were down 12% to 349.9 pence each in London on Wednesday afternoon. Over the past 12 months, the stock is down 43%, despiriting for investors.
The London-based retailer said in that in the financial year that ended September 3, its pretax loss widened to GBP296.7 million from GBP31.9 million the year before, as revenue fell 10% to GBP3.55 billion from GBP3.95 billion.
Adjusted earnings before interest, tax, depreciation and amortisation fell 32% to GBP124.5 million from GBP183.9 million. Adjusted Ebitda margin loss was 0.8%, compared to a positive margin of 1.1% the year prior.
"It's easy to understand how ASOS got into this mess. Consumer shopping habits have changed – after the heyday of Covid when everyone was ordering goods because they were bored at home, now there is more consideration made to purchases, something that's been exacerbated by the cost-of-living crisis. Heightened competition from the likes of Shein have also presented shoppers with cheaper alternatives," said Mould.
Despite this, Hargreaves Lansdown's Aarin Chiekrie said there were "no major surprises" in the full-year results.
Looking ahead, Asos said it expects a 5% to 15% decline in sales for the first half of financial 2024, and a return to growth in the final quarter. It also anticipates positive Ebitda. As for financial 2025, Asos said it expects to deliver revenue growth and return its Ebitda margin to pre-Covid levels of around 6%.
Financial 2023 "was a year of good progress for Asos in a very challenging environment, and I am proud of what the business has achieved, said Chief Executive Officer Jose Antonio Ramos Calamonte. "We have reduced our stock balance by [around] 30%, significantly improved the core profitability of the business, strengthened our balance sheet, and refreshed our leadership team."
Calamonte joined Asos in 2020 as chief commercial officer and was promoted to CEO in June 2022.
"Calamonte and team have a big job on their hands as they seek to turnaround ASOS, after prior management teams allowed costs, inventories and debt to rise as they chased sales," said Mould at AJ Bell.
"The plan to reduce inventory, improve stock turn and reduce discounting to improve margins, profits and cash flow all makes perfect sense, but the problems are clearly deep-rooted and the economic and competitive backdrop is equally unhelpful, given how management now expects sales to fall again in the twelve months to August 2024."
interactive investor analyst Victoria Scholar added that Calamonte's turnaround "clearly needs more time for it to bear fruit".
By Sophie Rose, Alliance News reporter
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