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Asos has lowered its full-year guidance after sales fell by 15% in the three months ended 3 September.
The group now expects EBIT to be around the bottom of the guided £40m to £60m range, with free cash inflow in H2 now expected to be roughly £60m excluding refinancing costs.
While the fashion retailer had a strong start to the period, it attributed its declining sales in July and August to a deterioration in the UK clothing market.
Despite the decline in sales, Asos maintains that Q4 will be another profitable quarter after approximately £300m of profit improvement and cost savings have been realised. This has been in line with the FY23 target set under its ‘driving change’ agenda, which increased order profitability by more than 35% year-on-year.
Adjusted gross margins also increased by 1.5% year-on-year, due to lower freight and duty costs that were partially offset by tactical investment in promotional activity to prioritise stock reduction in a challenging trading environment.
As such, inventory was down by roughly 30% year-on-year and ahead of guidance, supporting the transition to the new commercial model in FY24 and beyond..
Cash and undrawn facilities totalling about £430m at year-end, providing substantial liquidity following the refinancing and equity raise announced in May 2023.
José Antonio Ramos Calamonte, CEO of Asos, said: “Asos has delivered on the ‘driving change’ agenda, and as a consequence, is a leaner and more resilient business 12 months after its launch.
“We continue to focus on bringing the best fashion and the most engaging proposition to our customers as we make progress on our journey to sustainably profitable and cash generative growth.”
