Fast fashion but slow progress at loss-making Asos

theguardian.com:

“T here is a lag between operational change and visible results,” said online fashion retailer Asos in its half-year report, giving an optimistic spin on half-year numbers that were conspicuously awful.

While the new chief executive talks the management blah of optimising and rightsizing, an adjusted pre-tax loss of £87.4m was several degrees worse than the City had expected. The unadjusted version, which included a £129m stock write-down and various other whacks, was a loss of £291m, which is going some in the space of six months.

The shares plunged 23%, removing the last knockings of a new year rally that had been inspired by the thought that José Antonio Ramos Calamonte could perform a few quick fixes on a business that spent too many years chasing sales growth, especially overseas, without ever putting a robust operational model in place. The whoosh of extra demand during Covid lockdowns masked the flaws … until it didn’t.

Calamonte sounds a more nuts-and-bolts operator than his predecessors, which is presumably why he got the job. And after half a lap of the track, he is sticking to his target of £300m of cost savings this year. A strategy of less discounting and more concentration on selling items at full price also sounds entirely sensible.

The challenge, though, lies in believing that a return to what Calamonte called a “sustainable profit” can come as soon as the second half of its year. One question from the City is whether the “driving change” agenda is sufficiently radical. Another is how the novel sight of falling sales – revenues were down 8% in the half, despite inflation – will affect profit margins in the medium term.

Amid it all, one gets glimpses of how deep some issues run. The mini-revelation in the