Asos to write off inventory and cut costs as shoppers limit fashion spending

Asos to write off more than £100m of stock and cut costs after plunging into the red after annual sales growth nearly stalled as buyers hit by the cost of living crisis have limited their fashion spending.

The online fashion retailer said it had agreed to a £650m bank facility sterling to give it "financial flexibility" and aimed to reorganize its operations by reducing costs, improving inventory management and "fresh the culture" of the company to become more open to new ideas.

The group also plans to sell through other websites in overseas markets or share warehouse space with others, in a bid to cut costs. He did not rule out exiting certain markets altogether.

The changes come after Asos revealed sales rose just 1% to £3.94bn in the year to on August 21, when they fell to a pre-tax loss of £32million from a profit of £177million the previous year. Sales increased 7% in the UK, 10% in the US and 2% in Europe, but fell 9% in other markets. The disappointing overall sales growth came despite sales of the group's new Topshop brand more than doubling.

The group warned it expected to incur a loss in the first half of its current fiscal year. year and said it had run up nearly £153m in net debt compared to the previous year, when it held £200m in net cash.

The company's shares rose nearly 9% in morning trading after Wednesday's announcement. The rise follows a tumble in Asos shares on Monday after it confirmed it was in talks with lenders over changing the terms of a £350m loan facility.

José Antonio Ramos Calamonte, Asos' new chief executive, said the company had become too complex, was letting costs rise too much and was becoming "globally overloaded ", so it lacked scale in the United States, France and Germany.

He also said that the group had become too dependent on discounts to attract buyers because it had not invested enough in raising awareness of its brand or developing new products.

Asos will now buy its stock more frequently and closer to the when it goes on sale to ensure it has the right fashion.

Calamonte has said the full-year results were "resilient" but Asos could do "much more" and the retailer would "work determinedly to emerge from these turbulent times as a more resilient and agile business".

He said it was important for his operations to become more responsive to changing customer behavior, as there was "high volatility" in the way people bought reacting to economic and political events .

Calamonte said Asos, which has raised prices around 4% this year, was "not obsessed with being the cheapest in the world. market" despite competition from retailers such as China's Shein, and it was more important for the company to have the right fashion on sale.

It said: "Today I have set out a clear change agenda to strengthen Asos over the next 12 months and reorient our business for the future. This includes a number of decisive short-term operational measures to simplify the business, as well as actions to unlock longer-term sustainable growth by improving our speed to market, strengthening our focus on fashion, strengthening our leadership team and leveraging data and digital developments to better engage customers."

Asos said sales in the second half of its fiscal year were worse than expected as shoppers restricted spending in fall mode due to the cost of living crisis and have been also returned more items as they bought more fitted clothes than during the pandemic shutdowns, when stretchy casual clothing was popular. to demand a finer adjustment, more than doubled from last year's levels.

Returns also exceeded pre-pandemic levels during the second half of the fiscal year, buyers worried about the rising cost of li and purchased more on "buy now, pay later" programs. Increased sales in Germany, where shoppers are more likely to return unwanted items, also pushed the numbers up.

Despite the profits generated by managing returned goods, Calamonte said Asos would not consider charging for returns - unlike rival Boohoo.

...