Online fashion retailer Asos has posted a full-year loss and launched a series of cost-cutting measures, in the latest sign that the UK’s cost of living squeeze has deflated the ecommerce boom.
Asos, which targets 20-somethings and owns brands including Topshop and Miss Selfridge, also flagged that its operational changes to cut stock levels, reduce spending and slow automation would keep it in the red in the first half of its 2023 financial year.
However, investors reacted positively to the moves, sending Asos shares 9 per cent higher to 534p in early London trading, narrowing their loss this year to 78 per cent.
Cash-strapped customers returning more items have hurt the fashion retailer, which had previously been among the biggest winners from a surge in online shopping during the pandemic.
The group on Wednesday reported revenues up 1 per cent to £3.94bn in the 12 months to August 31, yet higher costs and squeezed margins resulted in Asos posting a pre-tax loss of £31.9mn, down from a profit of £177.1mn a year ago.
Mounting pressure on household budgets has compounded difficulties for groups such as Asos and its rival Boohoo, with the pandemic-induced boost for online retailers fading as consumers return to in-person shopping.
To counter the downturn, José Antonio Ramos Calamonte, recently appointed chief executive, announced a swath of measures to cut costs and simplify the group’s logistics.
“In recent years, the quest for growth has resulted in Asos becoming excessively capital intensive, too complex and overstretched globally, which has resulted in a lack of meaningful growth and scale in its key international markets of the US, France and Germany,” he said.
The operational changes “will simplify the business . . . by improving our speed to market, reinforcing our focus on fashion, strengthening our top team and leveraging data and digital developments to better engage customers”, he added.
The changes will result in “gross margin expansion, increased stock turn . . . and more effective capital deployment”, Asos said.
However, Asos warned the changes would result in a writedown of between £100mn and £130mn, to be booked in the first half of its 2022-23 financial year.
“Against the backdrop of significant volatility in the macroeconomic environment, it is very difficult to predict consumer demand patterns for the upcoming year,” Asos said, warning that it expected “a decline in the apparel market over the next 12 months”.
Source: Economy - ft.com
