Asos has slumped to a wider full-year loss as it said customers are still grappling with cost of living pressures but insisted it was seeing “green shoots” of recovery after a two-year turnaround.
José Antonio Ramos Calamonte, the Asos chief executive, said the market was still “volatile”. “I don’t think by any stretch of imagination things have got significantly better than where they were six months ago. They are not getting worse, which is good news, but there’s still a lot of volatility out there,” he added.
Sales in the UK fell by 12% in the year to 1 September as a result of the cost of living challenges, which particularly affected the fashion retail sector, the company said.
Overall revenues were down by 16% to £2.9bn, while the online retailer’s pre-tax losses widened to £379.3m from £296.7m. The news drove the share price down by more than 6%.
The company was left with a £1.1bn pile of unsold clothes after the Covid-19 pandemic, but said it had halved this over the past two years by selling items at a discount. It is focusing on a new product model to bring new clothes from design to its website in less than three weeks, as well as lowering the returns rate.
“We have changed most of our processes. We have set up from scratch a completely new way of buying that we call test and react. That is a massive change,” Calamonte said, adding that Asos has seen the “green shoots in the performance of our new stock in recent months”. Asos expects adjusted earnings to rise by at least 60% in the next financial year, to between £130m and £150m.
Asos has been hit by a shift away from online shopping since the Covid lockdowns ended, as well as fierce competition from companies such as the fast fashion online rival Shein and retailers that operate stores and online, such as H&M and Zara.
Calamonte said Asos recorded a slight improvement in September helped by the weather, which was much colder than last year.
He shrugged off the additional costs for employers announced in Rachel Reeves’s budget last week, such as increased national insurance contributions. It is “something that we are managing but not a significant sum”, he said.
He ruled out price increases as a result of these higher costs, and said there would have no impact on hiring.
Asos did not spend all of its £30m marketing budget after switching towards greater use of influencers. It will be working with 1,500 influencers a month by the end of the year, including its own staff.
The Asos boss said women’s animal print tops and dresses were selling well and hailed the “rise of burgundy” as the colour of this autumn. For men, baggy jeans and oversize T-shirts are in demand, while formal menswear has also sold well in the last two months.
Asos, which has a joint venture with the former Philip Green brands Topshop and Topman, is planning to launch a new Topshop website in the next six months. In September, it sold a partial stake in the venture for £135m to Heartland, an arm of Bestseller, the Danish fashion business controlled by the leading Asos shareholder Anders Povlsen.
