Asos profits plunge 105% as group outlines turnaround strategy

Asos has seen its profits plummet 105% to a loss of £9.8m in its latest full-year results, down from profits of £190.1m, as customers reigned in their spending amid the cost of living crisis. 

The group noted consumer behaviour underwent a “marked change” from April 2022 when consumers faced accelerating inflation and pressure on disposable incomes, with less demand for products at the start of the Autumn/Winter season. 

According to the group, this effect became “most apparent” through the impact on return rates, which increased from May 2022 to levels close to pre-pandemic.

It comes as the group’s new CEO, José Antonio Ramos Calamonte, outlined a 12-month turnaround plan which will include a series of short and long-term measures to help “refresh” and strengthen the group. According to Calamonte, the plan will be based on four key principles: simplicity; speed to market; operational excellence; and flexibility and resilience.

The plan will work to address the current issues facing Asos, including international operations that have “lagged expectations” and a supply chain operation which has “become inefficient in the face of supply chain disruption and macroeconomic challenges”. 

The plan will also review and renew the group’s commercial model and aim to improve inventory management, with the hope of creating a shorter buying cycle with enhanced speed to market. As part of the turnaround strategy, the group will also look to simplify and reduce its cost profile, with a focus on optimising its cost base, improving supply chain efficiencies, and eliminating excess costs through tighter controls. 

Calamonte added that the group needs to better leverage data and digital improvements to better engage customers, and called for a need to strengthen the leadership team and “refresh the company culture”.

He said: “Asos is a strong business with a compelling brand, customer offer and fashion credibility, with dedicated and passionate employees. Against the backdrop of an incredibly challenging economic environment, this unique combination has enabled our business to deliver a resilient performance this financial year in the UK – but I know we as a company can achieve far more. 

“Today, I have set out a clear change agenda to strengthen Asos over the next 12 months and reorient our business towards the future. This includes a number of decisive, short-term operational measures to simplify the business, alongside steps to unlock longer-term sustainable growth 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: “On the basis of the actions I have set out today, the team and I will work resolutely to emerge from these turbulent times as a more resilient and agile business – all the time guided by our purpose, to give our customers the confidence to be whoever they want to be.”

Looking ahead, the group said that trading has remained volatile into the start of FY23, with September 2022 trading showing only a slight improvement against August. Against the backdrop of “significant volatility”, it said it is “very difficult” to predict consumer demand patterns for the upcoming year. 

Within the UK, the group expects a decline in the apparel market over the next 12 months, but nonetheless “remains confident” in its ability to take share against that backdrop.