Asos has insisted its turnaround plan is working as it returns to profitability, despite reporting a 14% fall in sales to £858.9 million in its latest quarter.
In the three months ended 31 May 2023, the online fashion retailer claimed the drop in revenues is a reflection of “deliberate actions on capital allocation to improve profitability”.
Last October, Asos announced an overhaul of its business strategy following a raft of operational problems and the ongoing cost-of-living crisis impacting consumers.
As a result, the company saw active customers, down by 800,000 from the 24.9 million reported in H1 2023, reflecting a continued “focus on improving the profitability of sales over the pursuit of growth at any cost.”
The retailer, which reported a 71% drop in shares over the last year, revealed last month that sales had fallen about 15% in March and April when it reported a first half loss.
“We continue to focus on making Asos the best possible destination for our fashion-loving customers,” CEO José Antonio Ramos Calamonte said.
“At the same time, we are delivering on our plan to turn the business around: to right-size our stock; to generate cash; to reduce our net debt; and to structurally improve our profitability.”
He added: “I am confident in the direction we are going, we have restored profitability in the period and made good progress in clearing through our inventory to generate cash. We retain ample balance sheet flexibility and reiterate our expectations for improved profitability, cash generation and reduction in net debt in H2 FY23 and beyond.”
Looking forward, the company said it will retain its focus on profitable sales and its commitment to reducing inventory for the remainder of FY23.
Currently the group posted a 15% fall on its FY22 inventory, consistent with the target of 20% reduction by FY23, with 86% of stock less than 12 months old.
“While the company remains cautious on top-line outlook for the year ahead, the actions taken will continue to have a positive impact on profitability and cashflow.” it said.
As a result, Asos expects material cash generation in FY24 and therefore a “further reduction in net debt”.