Losses narrow at Asos despite slide in revenues

(Sharecast News) - Asos saw losses more than halve in the first six months of the year, the fast fashion brand confirmed on Thursday, despite a slide in revenues. The gross merchandise value (GMV) fell 9% on a like-for-like basis in the 26 weeks to 1 March, to £1.17bn, while adjusted group revenues were 14% weaker at £1.11bn.

However, adjusted operating losses at the online-only retailer narrowed to £18.3m from £39.6m. On a statutory basis, pre-tax losses came in at £137.9m, compared to £241.5m a year previously.

Asos, which is looking to turn itself around following a difficult period, said there had been "significant progress and momentum" in the first half. "We are taking decisive steps towards re-establishing Asos as a leading online fashion destination," chief executive Jose Antonio Ramos Calamonte said.

The company was hit hard by soaring debt levels, stiff competition and a global inventory surplus as well as high levels of returns.

It said there were "early signs" of topline improvement during the first half, particularly in the UK. New customers rose by around 10% year-on-year in the UK, and 2% across its top four markets. The adjusted gross margin improved 330 basis percentage points to 48.5%, supported by investments in fulfilment, product mix and cost discipline.

Looking to the rest of the year, Asos said current trading was in line with expectations, with GMV showing further sequential improvement in the third quarter to date.

It continued: "We have taken proactive actions to help mitigate inflationary impacts and supply chain issues arising from the conflict in the Middle East. We continue to monitor developments closely and are continuously reviewing a range of levers to protect profitability while ensuring seasonally-relevant product arrives to meet customer demand."

Full-year guidance was left unchanged, for adjusted earnings before interest, tax, depreciation and amortisation of between £150m and £180m. Interim EBITDA rose 21.5% at £64m.

As at 0930 BST, shares in Asos were down 1% at 222p.

Katie Cousins, analyst at Shore Capital, said: "We have been pleased to see margin progress continue during the first half, and the increasing sell-through rates, speed-to-market and reduced return rates are encouraging for customer satisfaction and provide evidence of management executing its strategy as planned.

"We continue to view the stabilisation of GMV as a key component of the investment thesis, noting progress in the right direction particularly within core regions such as the UK, and look for sustained profitability to support the now much-improved balance sheet."

Shore Cap has a 'buy' rating on the stock and a price target of 225p.

See latest RNS on Investegate