Asos profits plunge but turnaround plan is producing first ‘green shoots’

It revealed the challenges of battling to clear a £1.1bn stock mountain since 2022, with £520m still outstanding and around a £100m write-down on the value of its remaining stock.

Sales tumbled 16 per cent to £2.9bn over the year – worse even than the 15 per cent fall predicted recently by the firm – as the group’s turnaround plan saw it reduce stock and launch clearance sales to shift old ranges.

Shares in the firm fell 8 per cent in morning trading on Tuesday.

But chief executive Jose Antonio Ramos Calamonte cheered “green shoots” in the performance of its new ranges in recent months, with sales of this “newness” up 24 per cent year on year in the three months to September 30.

The firm looked to reassure that its turnaround would help it return to growth, forecasting underlying earnings to improve by at least 60 per cent to between £130m and £150m in 2024-25.

Mr Ramos Calamonte said: “The medicine we have taken – reducing our intake, discounting to clear old stock and rigorously revising our operations – while necessary has not made for attractive financial results over the last two years.

“However, we are confident we now have the right team, processes and business resilience on which to drive sustainable, profitable growth.

“We have already seen the green shoots in the performance of our new stock in recent months which gives us confidence that our new commercial model is delivering customers the right product at the right time.”

He added that the pain from the turnaround will continue as it holds its nerve and presses ahead with stock clearance as a priority.

It cautioned that sales will continue to fall in the first half of its new financial year.

“We will do things in the right way and we’re going to be patient,” said Mr Ramos Calamonte.

The group said the recent Budget tax changes, including increasing employers’ national insurance contributions and plans to increase business rates on large distribution warehouses, would add additional costs, though it insisted these would not be significant.

It said it would not look to pass on extra costs to customers.

The figures come after Asos struck a deal in September to offloadamajority of its stake in the Topshop and Topman brands to Heartland.

The online fashion retailer said that it will sell three-quarters of its ownership in the brands to Danish firm Heartland by forming a 75:25 joint venture with the Nordic company.

Heartland is the holding company belonging to Danish billionaire Anders Holch Povlsen, and also owns clothing retailer Bestseller, which runs 2,800 retail stores across 30 countries. It holds a significant stake in Asos.

A new dedicated Topshop website will be relaunched by next summer with the potential for bricks-and-mortar stores.