Asos in ‘intensive care’ after racking up a £290m loss
Asos on ‘intensive care’ after £290m loss as shoppers returned to brick and mortar stores
Asos lost almost a quarter of its value after it crashed to a loss of more than £290 million in the first half of the year.
On another dreary day for the fast fashion brand, shares fell 23.3 percent, or 148.4p, to 487.4p, after peaking at 7730p five years ago and trading close to 6000p during the pandemic.
The slump came as the company reported a loss of £290.9m for the six months to the end of February – far worse than its loss of £15.8m in the same period a year earlier.
Asos also gave a more pessimistic forecast for a low double digit drop in sales in the second half of the year after an 8 percent drop in the first half.
Going out of style: Online retailer Asos has been hammered as shoppers return to the brick-and-mortar store
Analysts warned that Asos, owner of Topshop and Miss Selfridge, “remains in intensive care.”
It has been hit by shoppers returning to brick-and-mortar stores after lockdown, while shoppers – typically aged between 16 and 35 – have cut spending and returned masses of online orders amid the cost of living.
But CEO Jose Antonio Ramos Calamonte, who has drawn up plans to overhaul the company’s “inefficient” business model since taking over the company last June, insisted a change in fortunes was imminent.
He said the retailer was “beginning to see the benefits of a repositioned inventory profile” and was “taking action to reduce the portion of our sales that are not profitable.”
“I am confident that we will return to sustainable profit and cash generation in the second half of the year and beyond,” he added. But analysts said the results were proof there was no overnight fix.
Charlie Huggins, quality equity portfolio manager at Wealth Club, said: ‘The operational turnaround plan will not be a quick fix – as Asos has a mountain to climb to rediscover its former glory.
“Asos has had the wrong priorities for too long. The main problem was that it cared more about sales than the bottom line.
Asos is off the operating table, but remains in intensive care.
“It will be some time before the success of the recovery can be assessed.”
In January, Asos said it would be closing three storage warehouses in the UK, Europe and the US, while downsizing some office space but not closing any locations.
Asos is also scrapping 35 unprofitable brands in a wider overhaul to turn its fortunes under Ramos Calamonte.
This includes better inventory management, cost reductions, an evaluation of the weak international companies and updating the culture of the group, including a realignment of the leadership team and new hires.
Asos has said it is cutting about 100 jobs to save about 10 percent on staff costs.