Asos sales fell and its loss grew in the first half as the British online retailer tried to cut inventory and excessive discounting.
Sales dropped by 8 per cent in the six months through February and operating losses widened to £272.5 million (€314 million), according to a statement Wednesday. Chief executive Jose Antonio Ramos Calamonte said the business has made progress in its turnaround despite “some very challenging conditions.”
Asos stock fell more than 6 per cent in early trading in London.
It’s nearly a year since Ramos Calamonte took the reins at Asos and the Spaniard is seeking to convince investors that his plan will return the business to profit by reducing stock, cutting spending and slowing automation in some of its key warehouses. The company is writing off as much as £130 million of stock and in January Asos started a deal with Secret Sales to sell discounted items.
The benefits of the turnaround are expected to come through in the second half, with Asos generating cash once more, as remedial measures offset sales that are still forecast to decline. The company said there will be a free cash outflow for the full year of £100 million, the bottom end of guidance.
Asos is struggling as Britain’s cost-of-living crisis pushes shoppers to prioritise their spending on essentials like food and energy rather than fashion. Rival retailer Next is also seeing falling sales with less demand for weddings and other events.
Like other online-only retailers, Asos has been hit hard by rising return rates, but unlike rivals Zara and Boohoo, Asos hasn’t introduced a fee for online returns.
The retailer has agreed a small extension to its £350 million revolving credit facility with lenders, pushing the deadline for repayment out to November 2024 from July 2024. The facility also steps down to £220 million by August next year.
Asos is building a management committee to support its overhaul as Ramos Calamonte has been managing the company with an almost entirely interim team. It has hired Michelle Wilson, former private banker at Berenberg, as senior director of strategy and corporate development. Dan Elton joins as senior customer director, with previous experience at Made.com and J Sainsbury. Asos is still seeking a chief financial officer after only managing to hire a temporary replacement despite months of searching.
Asos was for many years a stock market darling amid rising sales and profits. Now the company is one of the most-shorted UK stocks as investors bet the equity has further to fall. Matthew Earl, whose hedge fund Shadowfall was an early critic of Wirecard, has a short position in Asos worth about $3.4 million. – Bloomberg
