ASOS Reports First-Half Loss Due to Reduced Consumer Spending

ASOS Reports First-Half Loss Due to Reduced Consumer Spending

Asos Reports First-Half Loss Due to Reduced Consumer Spending
Asos Reports First-Half Loss Due to Reduced Consumer Spending
Retail Bum

Retail Bum

Retail Bum

Retail Bum

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ASOS reported a loss in the first half of the year attributed to the strain on consumers’ finances and a large volume of returned merchandise.

Nevertheless, the company expressed optimism about achieving profitability in the latter half of the year. Due to a significant restructuring initiative introduced in October of the previous year, the company reported an adjusted pre-tax loss of £87.4 million ($110.3 million) for the six months ending on February 28, 2023, compared to a profit of £14.8 million during the corresponding period in the previous year.

The fast fashion retailer’s revenue decreased by 10% on a constant currency basis, amounting to £1.84 billion.

ASOS and its competitor, Boohoo, have experienced substantial growth in recent years, with young adults worldwide gravitating toward trendy clothing items. The pandemic only bolstered demand further as traditional brick-and-mortar stores remained shuttered.

That said, fast fashion retailers, including Shein, have been grappling with various challenges over the past year, including supply chain disruptions, heightened competition, and the impact of a rising cost of living.

In March, the inflation rate in the U.K. reached 10.1%, the highest among Western European countries, further adding to these pressures.
As a result, ASOS’ shares have declined by 50% over the past year, leading some analysts to speculate that the company may require additional funding.

It is worth noting that ASOS maintained a cash balance of £408.6 million at the end of the year’s first half.

The company anticipates a free cash outflow of approximately £100 million for the full year, which falls within the lower range of its prior projections.

ASOS predicts a “low double-digit” drop in sales during the year’s second half. Still, the company expects to generate core earnings of £40 million to £60 million due to its focus on profitable sales. CEO José Antonio Ramos Calamonte expressed strong confidence in the company’s ability to achieve sustainable profitability and generate cash flow during the year’s second half and beyond.

At the statutory level, ASOS reported a pre-tax loss of £290.9 million in the first half of the year, including £203.5 million in one-time expenses linked to overhauling its business model.

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