ASOS losses jump amid inflationary pressures and inventory clearance

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

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

Its margins were significantly impacted by heavy discounting aimed at removing old stock accumulated during the peak of Covid-related restrictions.

ASOS did reduce its inventory levels to £593million, having set a goal to hold around £600million of stock by the end of this financial year.

But the move also contributed to its half-year turnover slumping by 18 per cent to £1.51billion, with sales further hit by poor trade across major territories and shipping disruptions in the Red Sea.

In the UK, the group’s revenue declined by 16 per cent as the challenging economic backdrop discouraged its younger customer base from making clothes purchases.

Meanwhile, its revenue plunged by a quarter in the United States, which the group blamed on heavy competition and a ‘more restrained approach’ to advertising.

ASOS faces 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 boost sales since the end of lockdown curbs drove shoppers back to buying more of their apparel in stores.

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

Julie Palmer, partner at Begbies Traynor, said if ASOS ‘can successfully tighten its inventory, which it has already made progress with, and align more closely with its customers’ evolving tastes and spending power, it may be able to find its footing when the backdrop 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 29 April.

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

Mike Ashley’s retail empire said it was unwilling to finance a turnaround of Matches because it continued to make losses and miss business plan targets.

Prior to Matches, Murray was a vice president at beauty products seller Farfetch and also held senior finance roles at Amazon and Sainsbury’s.

José Antonio Ramos Calamonte, chief executive at ASOS, said Murray’s ‘wide-ranging experience in the retail sector…will make him a valuable partner in the next phase of ASOS’ journey to becoming a faster, more agile and more profitable business.’