10th May 2023 09:27
(Alliance News) - Asos PLC on Wednesday reported a markedly weaker half-year financial outcome, though the online retailer said its turnaround plan is progressing.
The stock was down 12% at 561.03 pence each in London on Wednesday morning, the worst FTSE 250 performer.
Asos, which said it is "prioritising order economics over top-line", explained it is committed to ending the financial year with a better inventory position.
For the six months to February 28, revenue declined by 8.2% to GBP1.84 billion from GBP2.00 billion a year earlier. Its pretax loss widened to GBP290.9 million from GBP15.8 million a year ago.
The outcome reflects "both deliberate actions on capital allocation to improve profitability and a challenging trading backdrop".
"In addition to widespread cost of living concerns and their impact on discretionary spend, consumers have returned to stores post-pandemic causing online penetration to step back in the short-term," Asos added.
Asos said its gross margin fell to 36.1%, from 43.1% a year earlier. Its adjusted gross margin was largely flat year-on-year at 42.9%.
"It showed encouraging progress over the period, with February adjusted gross margin up more than 300 basis points year-on-year and sustained through March and April, supported by lower freight and duty rates," the company said.
Back in October, Asos announced a turnaround plan. It said it would look to improve inventory management, reduce its costs and "reinforce" its leadership team and culture. The plan was one of Jose Calamonte's first acts as chief executive.
"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," CEO Calamonte said on Wednesday.
"Thanks to the hard work and commitment of our teams, we have accelerated the roll-out of our new commercial model, delivered more than GBP100 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."
Calamonte added: "While some of these changes have impacted short-term sales growth, there are many causes for optimism as we progress through the second half of the year. 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 GBP200 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."
Asos cautioned its free cash outflow for the year will be GBP100 million, the bottom of guidance range which starts at breakeven.
By Eric Cunha, Alliance News news editor
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