Asos falls £291m into the red as shoppers return to high street

theguardian.com:

Asos has dived £291m into the red after sales slumped in what the online fashion retailer called a “challenging trading backdrop” as shoppers returned to physical high street stores and reined in spending on non-essentials.

Sales fell 8%, including a 10% drop in the UK, in the six months to 28 February – far worse than the 3% forecast by the City – as the company said it had deliberately shifted away from unprofitable sales and suffered from weak consumer demand and the December postal strikes.

The £291m pre-tax loss, against a £16m loss a year before, came after writing down £100m on unwanted stock as Asos focuses on a narrow range of products and attempts to update its fashions more quickly.

Asos said sales had continued to slide in March and April and it now expected them to fall by at least 10% for the year and to make an underlying profit of no more than £60m.

Andrew Wade, a retail analyst at Jefferies, said Asos now appeared to be set to make a pre-tax loss of about £70m for the year to the end of August, far bigger than the £19m anticipated by the City.

“Asos continues to face into significant challenges, with revenue declining more rapidly and net debt higher than anticipated,” Wade said in a note.

José Antonio Ramos Calamonte, the chief executive of Asos who took over last summer, said:“Our focus is on improving our core profitability, prioritising order economics over top-line growth and I am pleased with the strategic and rapid operational progress the business has made in the first half of the financial year, against some very challenging trading conditions.”

He said the business had found £100m in cost savings and secured new financing to create “a more sustainably profitable and cash-generative business”.

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