ASOS Reports Double-Digit Decline in Q4 Sales

Words by Retail Bum

ASOS Q4 2022 Sales Dip
ASOS Q4 2022 Sales Dip

British online fashion retailer ASOS reported a 15% decline in fourth-quarter sales and projected earnings to be at the lower end of its guidance range.

ASOS explained that the fourth-quarter sales decline conformed to their expectations, characterized by a robust beginning followed by a relatively weaker performance in July and August.

However, there was a deviation in their second-half adjusted gross margin, falling short by 50 basis points from their anticipated improvement of 200 basis points, primarily due to increased promotional activity.

Consequently, ASOS expects second-half earnings before interest and tax (EBIT) to likely land toward the lower end of the previously guided range of £40 million to £60 million ($49 million to $73 million).

Furthermore, the retailer highlighted that the projected free cash inflow shortfall of £90 million was primarily attributed to timing effects that were anticipated to be rectified in the near future.

“We have reduced our stock balance by circa 30%, significantly improved the core profitability of the business, and generated cash against a very challenging market backdrop,” said CEO José Antonio Ramos Calamonte.

Before the announcement, the consensus among analysts was an anticipated adjusted loss before interest and tax of £24 million for the full year ending on September 3, 2023, compared to earnings of £44.1 million in the previous fiscal year (2021/22).

ASOS reported a 16% decrease in fourth-quarter sales in the United Kingdom, a 7% decline in the European Union, and a 19% drop in the United States.

The decline in sales comes amidst the company’s efforts to implement its turnaround strategy, which was kicked off under the leadership of Ramos Calamonte in October 2022. This strategic shift came in response to a challenging economic climate and operational issues that negatively impacted its profits and stock performance.

The company’s stock has already witnessed a 38% decline over the past year, and it dipped an additional 1% during early trading on Tuesday.

Ramos Calamonte’s strategic approach aims to reverse these losses by prioritizing profitability over revenue growth. His strategy entails streamlining ASOS’ inventory, implementing cost-cutting measures, and bolstering the company’s cash reserves.

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