Asos shares suffer as expects revenue to fall short of consensus

Asos PLC shares slumped on Tuesday as the online fashion retailer warned on annual sales amid a ‘soft consumer backdrop’, though it expects to report an improvement in profit margin.

Asos shares were down 8.9% to 267.00 pence in London on Tuesday morning. Shares have fallen 38% of the past 12 months,

The London-based company expects to report revenue ‘slightly below consensus estimates’ for the financial year, which concluded around the start of this month.

According to company-compiled market consensus, Asos is expected to report a revenue decline of 8.4% at constant currency. Revenue in financial 2024 totalled £2.91 billion, or £2.90 billion on an adjusted basis. German bank Berenberg predicts a roughly 10% revenue decline for the year to £2.58 billion.

The weaker than expected revenue is due to the firm prioritising ‘higher quality sales against a soft consumer backdrop’.

Asos expects a gross margin improvement of around 350 basis points, aided by a focus on ‘higher full-price sales mix and lower markdown activity’. Its adjusted gross margin in financial 2024 was 43.4%, so a 350-point improvement would take this to 46.9%.

Adjusted earnings before interest, tax, depreciation and amortisation are expected to rise more than 60% and be towards the lower end of the £130 million to £150 million guided range. The adjusted Ebitda in financial 2024 was £80.1 million. Adjusted Ebitda consensus stands at £138 million.

Asos expects to report ‘a modest free cash inflow’ for the recent year, an outcome ‘ahead of broadly neutral guidance’. It had reported a £37.7 million free cash inflow in financial 2024.

‘As it entered FY25, Asos had essentially completed phase one, having significantly reduced and comprehensively refinanced its net debt at the beginning of the year, announcing further efficiencies to its global distribution network with the mothballing of its Atlanta fulfilment centre, and reducing its inventory position by more than 60% since the end of FY22,’ the company said.

‘Over the summer Asos pivoted to the final phase of its transformation, launching the start of a series of new customer experiences - including its exclusive adidas x Asos collaboration, the Asos.WORLD loyalty programme in the UK, and expanding Topshop and Topman through new channels - with positive early signs on customer engagement.’

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