Online fashion firm Asos suffers sales hit from wet summer weather
The group said UK sales tumbled 16 per cent in its final quarter, with poor weather adding to its troubles amid a worsening UK clothing market.
The fourth quarter decline left like-for-like comparable UK sales 13 per cent lower overall in the year to September 3.
Total group comparable sales fell 15 per cent in the final quarter and 11 per cent over the year, Asos said.
It said that full-year underlying earnings were now expected around the bottom end of its £40m to £60m guidance, while it said cash flow had suffered a £60m hit from the weaker July and August trading.
It said this cash flow impact would unwind in September and October.
But the group said that despite the summer sales blow, it expects to be profitable again in its fourth quarter, with turnaround efforts having driven around £300m of profit improvement and cost savings – in line with targets.
Jose Antonio Ramos Calamonte, chief executive of Asos, insisted the clothing retailer was a “leaner and more resilient business” after a year of his overhaul plan.
“We have reduced our stock balance by around 30 per cent, significantly improved the core profitability of the business and generated cash against a very challenging market backdrop,” he said.
Asos recently revealed it had returned to profitability in its third quarter thanks to recovery efforts.
But its sales have suffered as consumer spending took a knock, with customer demand waning in the face of rocketing household bills, while the firm has experienced supply disruption and surging cost pressures over the past year.
Asos also said it has been losing customers amid the overhaul, with active customers down around 9 per cent year-on-year at 23.3 million – a fall of about 3 per cent since the third quarter.
The group has suffered hefty share prices falls over the past year as trading woes have taken their toll, with the firm demoted from the FTSE 250 Index in June.
Victoria Scholar, Head of Investment, at interactive investor said: “Asos reported a 15 per cent drop in fourth quarter total group revenue with declines in the UK, EU, US, and the rest of the world. Its adjusted gross margin rose by around 150 basis points year-on-year in the second half, falling short of guidance for an increase of 200 basis points.
"But inventory fell by around 30 per cent year-on-year, ahead of forecasts. Asos has been focusing on its ‘Driving Change’ agenda having launched a major business overhaul last October. It has been trying to manage inventory and save costs.
"With inflation coming down, Asos has benefitted from lower freight and duty costs. However, the backdrop of a weak consumer, elevated inflation and higher interest rates are taking their toll on sales with a weak performance in July and August and a ‘deterioration in the UK clothing market’. Asos has been trying to draw in customers by investing in promotional activity to help reduce stock and combat the challenging trading environment and macroeconomic headwinds. However, that investment has impacted margins, which came in short of guidance.”