Asos reports Q4 sales drop, but remains upbeat on recovery

British fashion e-tailer Asos, which has been undergoing a turnaround following a spate of losses, saw its sales drop 12 percent on a reported basis in the fourth quarter.

Despite that, CEO José Antonio was optimistic of the company’s ongoing recovery, and said the business has become “leaner and more resilient” in the 12 months since launching its Driving Change agenda.

The strategy includes reducing the company’s inventory and cutting costs.

“We have reduced our stock balance by around 30 percent, significantly improved the core profitability of the business, and generated cash against a very challenging market backdrop,” Antonio said Tuesday.

But back to the sales. All of Asos’ markets posted year-on-year declines, with the biggest in the Rest of the World, down 26 percent, followed by the US, down 19 percent.

In its home market of the UK, where Asos first made its name as a fashion e-tailer behemoth, sales were down 13 percent.

Its European market saw the smallest drop, down 4 percent.

Wet weather dampens sales

Antonio said that all markets - particularly the UK - were negatively impacted by a wet July and August following hot weather in June.

On a like-for-like basis, fourth-quarter sales fell 15 percent, which was in-line with guidance.

Looking at Asos’ bottom-line, which has been the focus of its turnaround strategy, Antonio said it made 300 million pounds of profit improvement and cost savings, in line with its FY23 target.

This has driven order profitability up by over 35 percent year-on-year, he said.

Looking ahead, the business now expects earnings before interest and taxes (EBIT) for the second half to be at the bottom end of its previous guidance of between 40 million pounds and 60 million pounds.

It forecasts free cash inflow excluding refinancing costs to be around 60 million pounds, down from its previous guidance of 150 million pounds.

All other guidance remains unchanged, it added.