Following today’s release of ASOS’ figures for the year ending 3 September 2023; Pippa Stephens, senior apparel analyst at GlobalData, a leading data and analytics company, offers her view: “ASOS’ group revenue fell by 12.2% in its Q4 FY2022/23, a further downturn from its 9.1% decline in the first nine months of the year, as its product offer continues to struggle to hit the mark with its core shoppers. Alongside the ongoing inflationary pressures, the retailer has seen its Gen Z customers shift towards more agile and affordable competitors like Shein, while its designs have become too youthful for the millennials that grew up with it, driving its full year sales to plummet by 9.8%. EBIT in H2 was over 100% higher than last year, thanks to the retailer’s focus on improving order profitability through management of its least profitable customers, introducing returns charges in its non-core markets, and trial of its new Test & React model. Despite this, ASOS’ adjusted EBIT for the year fell by £29.0m.
“Performance in the UK and US was similar, with constant currency revenue decreasing by 12% and 13% respectively, due to being plagued by high inflation, leading shoppers to cut back on non-essential spending. These markets have also suffered from the rapid rise of Shein, which poses a massive threat to ASOS due to its significantly cheaper prices and fast product turnaround. ASOS’ performance in the US is particularly disappointing considering its Nordstrom partnership which should have boosted sales in the region, with its sales also waning massively in H2 compared to H1, spelling trouble for the year ahead. ASOS experienced its strongest performance in Europe, where constant currency revenue only fell by 3%, though this is partly due to weaker sales in the comparative period. The rest of the world saw the greatest decline of 30%, but this is largely due to its suspension in Russia, with like-for-like constant currency revenues excluding Russia declining by 16%.
“ASOS hopes that its Driving Change agenda will lead to improved future performance. Its inventory levels are now down 30% on the year, which will help profitability, and though it has had to reduce intake to achieve this, which has impacted its sales, its levels of newness are gradually improving. Its new Test & React model, which reduces lead times to around two weeks, has seen pleasing results so far, with styles experiencing faster sell throughs, and expansion of this model will enable it to better compete with Shein. While these outcomes are positive, it will take time for these initiatives to have a material impact on ASOS’ results, with a revenue decline of between 5% and 15% anticipated in FY2023/24, and an eventual return to growth only expected by FY2024/25.
“The news earlier this week that ASOS is considering the sale of Topshop to Authentic Brands Group (ABG), after only acquiring it in 2021, is likely an attempt to recover profitability, but it should not take this decision lightly, with the brand having been one of its top performers in previous years. The brand fits well with ASOS’ other ranges and resonates with its older shoppers who grew up with it, so has potential to become a shining light for the platform once again if given the right attention. However, Topshop’s products can get lost among ASOS’ extensive offering, so if the rumoured sale were to happen, it could provide greater visibility to its ranges, especially if ABG decided to relaunch Topshop’s physical stores.”
