- ASOS’ full-year underlying revenue fell by 14% to £2.5bn.
- Adjusted operating losses improved from £82mn to £32mn.
- Net debt improved from £297mn to £185mn.
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“Online fashion powerhouse ASOS is on its way to delivering exactly what investors want – better profitability. Don’t worry too much about the double-digit sales decline for now. It’s part of the strategic shift, as ASOS chose to remain firmer on pricing by not moving as many clothes to the sales racks last year. While that’s making for some tough comparable figures on the top line, profitability is starting to reap the benefits, with gross margins and underlying cash profits landing well ahead of the prior year.
ASOS also announced earlier this week that it refinanced its debt at interest rates several percentage points lower than the prior level. That’s a very good sign. Not only does it reduce the cash interest cost by around £5 million per year, but it’s also a direct reflection of a lender’s view of ASOS’ riskiness – lower interest rates on debt mean less perceived risk- highlighting the improved operational performance of the company in recent times.
While this is all positive, there’s still a long way to go and a lot of challenges to navigate before ASOS returns to the land of profitability. Active customer numbers and order frequency are still heading in the wrong direction. That’s partly due to the reduction in discounting activity and the shift in focus away from less profitable customers.
Challenging market conditions and inflationary pressures are other factors to contend with, both of which are outside of ASOS’ control. UK retail sales fell by 1.1% in October, below consensus expectations of a flat year-on-year performance. ASOS will be hoping that consumer confidence and spending pick back up for the peak Christmas season, otherwise returning the top line to growth territory will be an even harder challenge.”
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