ASOS has reported a loss of £290.9m for the six months to 28 February 2023 on sales of £1.84m which had fallen by 7 per cent as compared with those for the same half last year.
UK sales had fallen by 10 per cent, with Europe on par with last year, the US down by 7 per cent and the rest of the world plummeting by 12 per cent. Its profits were impacted by £203.5m of adjusting items, mostly linked to the business’ “Driving Change” agenda which generated £128.2m of stock write-offs and close to £50m of non-cash property impairments from the closure of logistics facilities and part of its HQ premises which it had reduced in size.
Commenting on the results, Julie Palmer, partner at Begbies Traynor, said: “ASOS’s troubles are well known after the last three years during which it battled the pandemic, supply chain disruptions, breakneck expansion, rising costs, management upheaval and customers returning to the high street having previously been forced online by Covid.
“Facing such issues, it’s no wonder that ASOS shares are one of the UK’s most shorted, as speculators bet the fast fashion business will fall even more out of style with investors.
“Today’s almost £300m loss might seem like yet another blow but it’s one the market was braced for. ASOS had previously warned much of this dive deeper into the red would come from writing off unwanted stock which hasn’t sold and is clogging up the company’s distribution chain, with inflation and other rising costs also big contributors”.
ASOS’ new management team has been taking action to make the business less vulnerable in the current weaker economy and much stronger going forward. Its remedial programme is around a third of the way to the forecast result of delivering a £300m-a-year profitability boost. Key aspects have included abandoning brands that don’t sell, less discounting, using a third party to sell off overstocks, and introducing tighter conditions for its customers with minimum order threshold qualifications for free delivery, as well as charges for returns.
ASOS has also recognised that a key part of its problem stems from around 6 per cent of its 25m active customers who between them cause a £100m-plus hit to the company’s profitability. This group which orders more often than average tends to go for heavily discounted items and then make the highest levels of returns.