UK retailer ASOS' sales decline 18% in H1 FY24

26 Mar '24

3 min read

Insights

ASOS faced an 18 per cent unaudited sales drop in H1 FY24, in line with forecasts and continuing FY23's trends.
Despite challenges, progress in its Back to Fashion strategy and a significant £240 million ($303.4 million) boost in free cash flow were highlights.
The firm aims for a positive EBITDA in FY24, with sales expected to decline by 5-15 per cent.

ASOS, a UK-based global online fashion retailer, has reported a challenging first half of fiscal 2024 (H1 FY24), with unaudited sales experiencing an approximately 18 per cent decline, aligning with the company's forecasts. This performance echoes the continuation of trends from the fourth quarter (Q4) of FY23, as ASOS persists in enacting strategies initiated in FY23 to bolster core profitability under its Driving Change agenda. A significant reduction in stock intake by roughly 30 per cent year-on-year has been a part of the company's effort to right-size inventory levels.

Despite these hurdles, ASOS has made notable progress in its Back to Fashion strategy aimed at revitalising the brand's core fashion offering. Key achievements include the clearance of aged stock and a transition towards a new operating model set for full implementation by FY25. The company is on track to enhance stock efficiency and decrease inventory to around £600 million (approximately $758.6 million) by the year's end. Its Test and React initiative, accounting for approximately 5 per cent of own-brand sales, has successfully shortened the design-to-site timeline for high-fashion products to 2 to 3 weeks, significantly boosting ASOS's responsiveness to the fast-changing consumer demand, the company said in its trading statement for the 26 weeks to March 3, 2024.

The company saw a substantial improvement in free cash flow by approximately £240 million (approximately $303.4 million) in comparison to H1 FY23, fuelled by enhancements in underlying profitability and efficient aged stock clearance. ASOS reported a cash balance of over £330 million, marking an improvement of over £20 million from the first half of FY23.

Looking forward, the company maintains its full-year guidance with expectations of a 5-15 per cent decline in sales, a return to positive adjusted EBITDA, inventory levels reverting to pre-COVID norms, and sustained positive cash generation contributing to a reduction in net debt.

"ASOS is becoming a faster and more agile business, aided by the incredible work of our teams to speed up all of our processes to deliver the fashion, quality and prices that our customers want, when they want it. I'm excited by the performance of our new collections, while we have also made great progress in monetising inventory that built up over the pandemic and in improving the core profitability of our operations. We have reconfirmed our guidance for FY24 as we lay the foundations for a more profitable, cash generative business from FY25 and beyond," said Jose Antonio Ramos Calamonte, chief executive officer.

Fibre2Fashion News Desk (DP)

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