Despite reports that progress is being made, ASOS’s online fashion retailer’s rehabilitation initiatives will not be sufficient to halt revenue declines during the current fiscal year.
ASOS’s stock fell as it predicted a second year of dropping sales and disclosed yearly losses.
The online fashion retailer’s stock declined by over 6% subsequent to its market update, which was postponed by one week at the request of auditors seeking additional time.
Under the leadership of CEO Jose Antonio Ramos Calamonte, the organisation has attempted to reverse its dismal financial performance, which has been hampered by a decline in demand following the pandemic and unprecedented stock difficulties.
ASOS was contemplating the sale of the Topshop brand. The company’s objectives are to cut costs, reduce surplus fashion volumes, and update product lines.
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Amidst rumours, “We do not comment,” he stated on an analyst call.
ASOS warned that prior stock issues will hurt sales and profitability throughout the fiscal year.
Sales declines of between 5 and 15 percent were anticipated.
With 11% lower revenues, the company reported an annual loss of £29 million for the period ending September 3rd.
Statutorily, pre-tax losses significantly increased from £32 million the previous year to £297 million.
Comparison to Competitor
Its current situation stands in stark contrast to that of competitor Next, which disclosed its fourth profit upgrade in six months on Wednesday morning, attributed to a 4% increase in full price sales for the third quarter ending on October 28.
Mr. Calamonte stated to investors, “FY23 was a year of significant advancement for ASOS amidst a highly competitive environment. And I am extremely pleased with the company’s accomplishments”.
“Our stock balance has been reduced by approximately 30%, the company’s core profitability has been substantially enhanced, our balance sheet has been fortified, and our leadership team has been revitalised.”
“Stock acquired during the summer under our new commercial model has performed exceptionally well. Which instills confidence in us to expedite the implementation of our new processes.
In light of this, we are investing in our brand and implementing decisive measures in FY24 to liquidate inventory acquired under our previous business model, all the while significantly enhancing our time-to-market and reinforcing our commitment to fashion, which is our true calling.
Russ Mould, investment director at AJ Bell, commented on the performance: “ASOS is severely damaged. Despite the company’s earnest efforts to exaggerate its progress in business restructuring, the headline figures for its fiscal year-end results present an entirely different picture.
“Pre-tax losses have significantly worsened, net debt has soared, and sales have declined.”
Challenges Ahead
ASOS is no longer considered a fashion industry disruptor. Its fifteen minutes of prominence have passed, and the company is now compelled to reconsider its approach.
