Asos swings to loss as cost of living crisis bites

Online fashion retailer Asos has posted a full year loss and launched a series of cost-cutting measures, in the latest sign that the UK’s cost of living squeeze has deflated the ecommerce boom.

Cash-strapped customers returning more items have hurt the fashion retailer, which had previously been among the biggest winners from a surge in online shopping during the pandemic.

The group posted revenues in the year to the end of August up 1 per cent to £3.94bn, yet the hit to profits was far greater as margins came under pressure. Asos reported a pre-tax loss of £31.9mn, down from a profit of £177.1mn a year ago.

Mounting pressure on household budgets has compounded recent difficulties for groups such as Asos and its rival Boohoo. The pandemic-induced boost for online retailers had already begun to fade as consumers returned to shopping in-person.

Asos, whose clothing is aimed at 20-somethings and its brands include Topshop and Miss Selfridge, has lost almost 80 per cent of its market capitalisation this year.

To counter the downturn, José Antonio Ramos Calamonte, recently appointed chief executive, announced a swath of measures to cut costs and simplify the group’s logistics.

“In recent years, the quest for growth has resulted in Asos becoming excessively capital intensive, too complex and overstretched globally, which has resulted in a lack of meaningful growth and scale in its key international markets of the US, France and Germany,” he said.

The operational changes “will simplify the business . . . by improving our speed to market, reinforcing our focus on fashion, strengthening our top team and leveraging data and digital developments to better engage customers”, he added.

The changes will result in “gross margin expansion, increased stock turn, faster speed to market and more effective capital deployment”, Asos said.

However, the group’s decision to cut its stock levels would result in a writedown of between £100mn and £130mn to be booked in the first half of its 2023 financial year, Asos said.

“Against the backdrop of significant volatility in the macroeconomic environment, it is very difficult to predict consumer demand patterns for the upcoming year,” Asos said, warning that it expected “a decline in the apparel market over the next 12 months”.