Losses at ASOS are increasing due to inflationary pressures and stock clearing

ASOS has reported wider losses as cost of living pressures and stock reduction measures continued to weigh on sales.

The online fashion retailer revealed that adjusted pre-tax losses rose to £120 million in the six months ended March 3, up from £87.4 million in the same period last year.

Margins were significantly impacted by heavy discounting aimed at removing old inventory built up during the peak of Covid-related restrictions.

ASOS has reduced its stock levels to £593m, with the aim of having around £600m of stock by the end of this financial year.

But the move also contributed to half-year sales falling 18 percent to £1.51 billion, with sales further hit by poor trading in large areas and shipping disruptions in the Red Sea.

In Britain, the group’s sales fell 16 percent as challenging economic conditions discouraged its younger customer base from buying clothes.

Meanwhile, revenues in the United States fell by a quarter, which the group blamed on fierce competition and a “more restrained approach” to advertising.

ASOS is facing increasing rivalry from Chinese fast fashion brands Temu and Shein, whose sales have skyrocketed in recent years.

And like other online retailers, ASOS has struggled to increase sales since the end of lockdown measures prompted shoppers to buy more clothes in stores.

As a result, ASOS shares have fallen by around 94 per cent since peaking in April 2021 around £59.95. They rose 5 per cent to £3.50 on Wednesday morning, despite the company reporting a higher loss.

Julie Palmer, partner at Begbies Traynor, said that if ASOS “can successfully tighten its inventory, which it has already made progress on, and better suit the evolving tastes and purchasing power of its customers, the company may be able to find its footing when the background improves.’

ASOS further announced on Wednesday that it has appointed a new chief financial officer, Dave Murray, who will replace current interim finance boss Sean Glithero from April 29.

Murray was most recently CFO of e-commerce platform Matches Fashion, which went into administration in March, just three months after it was acquired by Frasers Group.

Mike Ashley’s retail empire said it was unwilling to finance a turnaround in Matches as it continued to make losses and failed to meet its business plan objectives.

Before Matches, Murray was vice president at beauty products retailer Farfetch and also held senior finance roles at Amazon and Sainsbury’s.

José Antonio Ramos Calamonte, CEO at ASOS, said Murray’s ‘broad experience in the retail sector… will make him a valuable partner in the next stage of ASOS’ journey to become a faster, more agile and more profitable company. ‘