Online fashion retailer ASOS has reported lower sales but a return to profit for the three months ending in May, according to its recent trading update. The company saw a decline in total group revenue of 11%, with UK sales down 14% and EU sales down 4%. Sales to the US fell 15%, while sales to the rest of the world fell 13%.

Despite the decrease in sales, ASOS emphasized its return to profitability, with adjusted earnings before interest and tax increasing by over £20 million compared to the previous year. The company is on track to deliver its adjusted EBIT guidance of £40 million to £60 million in the second half of the fiscal year. ASOS attributed this positive performance to its capital allocation strategy, which has focused on improving the profitability of underperforming brands and geographies.

ASOS also reported a 30% increase in profit per order so far this year, thanks to efforts to enhance the profitability of its sales. The adjusted gross margin has risen by 350 basis points, supported by improvements in freight and sourcing.

The company has witnessed a decline of 0.8 million active customers compared to the previous reporting period, as it prioritizes profitability over pursuing growth at any cost. ASOS has also reduced its inventory by approximately 15% compared to the previous fiscal year, with 86% of its stock being less than 12 months old. The company has been focused on right-sizing its stock position and improving its financial situation.

Previously closing the fiscal year with £1.1 billion in inventory, ASOS has implemented a recovery plan to convert existing stock into cash and purchase less future stock. This plan involves investing in customer acquisition and lifetime value once a profitable base is established. The company aims to continue reducing inventory and maintaining a focus on profitable sales throughout the rest of the fiscal year.

ASOS’s profit expectations for the second half of the fiscal year and the full year remain unchanged. CEO José Antonio Ramos Calamonte expressed confidence in the direction of ASOS and their progress in turning the business around. He emphasized the company’s commitment to right-sizing their stock, generating cash, reducing net debt, and improving profitability.

ASOS is confident in its ability to meet its goals for improved profitability, cash generation, and debt reduction for the second half of the fiscal year and beyond. The company is dedicated to becoming the preferred destination for fashion-loving customers while strengthening its financial position.

Useful links:
ASOS Official Website
Retail Gazette – ASOS Industry News