As expected, the British online retailer Asos is in the red in the first half of the year. The company cites the difficult online market environment and costs for the ongoing restructuring as reasons.
The net loss for the first half to the end of February was £214.5 million compared to a profit of £12.1 million in the same period last year. Asos announced on Wednesday that sales fell by 8 percent to 1.8 billion British pounds as a result of the restructuring measures.
“While some of these changes have impacted near-term revenue growth, there are many reasons for optimism as we move forward in the second half of the year,” Asos CEO José Calamonte said in the statement. The initiatives to reduce costs and optimize profits have already led to an improvement.
British customers are cautious
While Asos benefited from lockdowns during the pandemic, the online retailer’s revenue is suffering as people return to shopping more in-store and less online. Inflation, which is around 10 percent in the UK in particular, and the rising cost of living are also making consumers more cautious.
In view of these developments, it is not surprising that sales in the United Kingdom fell by 10 percent compared to the same period last year. Revenues fell 7 percent in the US and 12 percent in the rest of the world, while remaining stable in mainland Europe. Overall, the number of active customers decreased by 7 percent in the reporting period, from 25.2 to 24.9 million – the loss of customers from Russia also had a negative effect here.
Asos counters the difficult online fashion market with internal measures that are intended to improve profitability in the future. As part of the reforms announced in October, the fashion company reduced the breadth of its range. Rebates will also be capped to improve profitability, but in the short term this will affect sales, the company said in a statement.
Asos hopes for the second half of the year
In March and April, these measures are expected to have accounted for half of the drop in sales, but Asos is now hoping to see the positive effects from the austerity program. They should show up especially in the second half of the year.
While sales are expected to fall in the low double-digits, profitability is expected to pick up again. Adjusted earnings before interest and tax are expected to be between £40m and £60m, with an operating margin of 3%. In the past half year, these were still minus 69.4 million British pounds and minus 3.8 percent.
After the results were released, Asos shares fell 11.58 percent to 562.20 pence.