ASOS H1 numbers make grim reading, but it reports strong progress, names new CFO

ASOS has reported its results for the 26 weeks to 3 March and as expected, they’re not great. But the company did say it’s made strong progress on speed and profit initiatives under its Back To Fashion strategy.

Looking at the headline figures, they were weak on both an adjusted and statutory basis, with the adjusted figures taking into account the huge amount of change happening at the company at present. 

So, adjusted group revenue fell from £1.838 billion to £1.497 billion during the first half. And statutory group revenue was down 18% at £1.505 billion. And the adjusted gross margin fell 260 bps to 40.3% although the statutory gross margin actually rose 390 bps to 40%.

Its adjusted EBITDA was a loss of £16.3 million from a profit of £4.6 million and the adjusted loss before tax widened from £87.4 million to £120 million. The statutory operating loss narrowed from £272.5 million to £246.8 million and the pre-tax loss was also lower at £270 million compared to £291 million a year earlier.

The company’s active customer numbers dropped by 14.1% and average order frequency was down 8.1% with the total number of shipped orders dropping almost 20% and the total number of visitors down by over 14%. But average basket values did edge up by 0.8%. 

Regional weakness

In the UK, which is its largest market, total sales dropped by 16% and in Europe they fell by 11%. The company said that France was a particularly challenging market although it did manage to grow its share there during the clearance sale period.

The picture was much worse in the US where total sales were down 29% due to general market weakness and strong competition, and in the rest of the world where they fell by 35%.

On the plus side, it delivered a £240 million year-on-year cash improvement “through disciplined inventory and cost management, representing our strongest H1 cash performance since 2017”.

And it’s ahead of plan on stock reduction with £593 million stock at H1 vs its FY24 objective of £600 million. 

It sold-through around 83% of AW23 stock in H1, representing a 17ppt annual improvement and resulting in a two-thirds reduction in volume of AW stock carried forward.

And it “increased stock turn on newness by more than 40% with a c.10ppt improvement in 12-week sell-through — indicative of better and more relevant product under the new model”.

Plus its flexible models are “scaling well”. Test & React is running at around 5% of own-brand sales, while Partner Fulfils is running at 5% of partner brand GMV.

Test & React, which brings stock into the business on a two-to-three week lead time, was initially launched in the strategically important ASOS Design Womenswear Jersey Tops and Jersey Eveningwear Dresses categories, together responsible for close to 20% of ASOS Design Womenswear sales. 

It has already scaled to over 20% of the Jersey Eveningwear Dresses category and in Jersey tops is approaching 40%. 

It’s now been rolled out to other categories such as Soft Wovens and will expand into Denim in the second half. It’s on track to hit its Test & React target of exiting the year with a run-rate of around 10% of own-brand mix and achieving around 30% in the mid-term. 

Gross margin on Test & React product in H1 was 58%, “an exceptional achievement despite higher sourcing costs as a result of strong full-price sell-through turning on just three weeks cover”. 

We’re told these impacts “will become more visible in our group performance as Test & React becomes a larger part of our mix in FY25 and beyond”.

The company also said over 60% of sales from product are now excluded from promotions. However, the adjusted gross margin still fell due to planned discounting to clear old stock. Further clearance activity is planned in H2 “to unlock the full benefit of the new commercial model from FY25”.

And it reiterated its guidance for FY24 sales to decline of 5%-15%, but for positive adjusted EBITDA and cash generation.

View from the top and new CFO

CEO José Antonio Ramos Calamonte said: “At the beginning of this year we explained that FY24 would be a year of continued transformation for ASOS as we take the necessary actions to deliver a more profitable and cash generative business. 

“ASOS is becoming a faster and more agile business, and we are reiterating our guidance for the full year as we lay the foundations for sustainably profitable growth in FY25 and beyond.”

The company also named Dave Murray as its new CFO. He’ll jointer this month and Sean Glithero, the current Interim CFO will leave the company following a handover period to ensure a smooth transition. 

Murray has more than two decades’ experience across a range of finance roles in the retail and e-commerce industry. He spent a large proportion of his career at Sainsbury’s and Amazon in the UK, before holding senior finance roles at Farfetch and most recently was CFO of Matches.