Following today’s release of ASOS’ figures for the three months ending 31 May 2023; Pippa Stephens, senior apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Consumers’ return to physical stores and shift away from fast fashion has continued to hit ASOS, with its group revenue in Q3 FY2022/23 plunging by 10.9% to £858.9m. However, its Driving Change agenda, which focuses on reducing stock intake and improving order profitability, has started to see green shoots, with its EBIT now back in the black, having risen by £20m year-on-year. Its inventory position has significantly improved, with stock levels down 15% on last year, and 86% of items less than 12 months old, meaning its offering is now more in sync with current trends and more desirable for shoppers. ASOS’ performance was weakest in the US, where adjusted constant currency revenue fell 21%, though stimulus payments boosted disposable income last year. The UK and Europe declined by 15% and 8% respectively, and though both are plagued by high inflation rates, ASOS is underperforming the wider online fashion market. ASOS has maintained its H2 guidance of a low double-digit decline for constant currency revenue excluding Russia, signalling that its troubles are expected to continue into Q4.
“ASOS’ share price rose c15% this morning, proving the return to profitability has given some hope to investors, though it is still around 95% lower than its highs five years ago. Speculation continues regarding a potential takeover, though ASOS has not yet addressed the rumours. Turkish fast fashion retailer Trendyol reportedly placed a £1bn bid for the retailer back in December, and Frasers Group has been raising its stake, which now sits at 9.9%. It’s unsurprising that ASOS is attracting interest, as despite its subpar performance over the past year, its sales in H1 were still 40.0% above pre-pandemic levels, and it is the sixth largest fashion retailer in the UK, with a market share of 3.1%. Its digital proposition is also superior to many other fast fashion players, with strong delivery and returns options, fulfilment times and warehouse capabilities. Any new owner would need significant online expertise however, to ensure it stays ahead of the game.
“The retailer is also aiming to lower its prices and reduce lead times to become more competitive, but this risks impacting the quality of its products, which has already fallen considerably across its own brand ranges in recent years. It is also unlikely to be able to compete with the likes of Shein and PrettyLittleThing in terms of price, with the affordability of these players driving their desirability among Gen Zs. With ASOS’ number of active customers falling by 0.8 million in Q3 FY2022/23, it should now focus on winning back the millennials that grew up with it, by ensuring its ranges include fashionable styles which are more wearable, sophisticated and have longevity, as this demographic want clothes that will last. ASOS’ rental launch on Hirestreet in May was a wise move, given the extent of its occasionwear offering, which many consumers would only be willing to wear once. However, it needs to do more to truly appeal to eco-conscious shoppers, with more sustainable production methods and a significant venture into the fashion resale market needed to boost its credentials.”
