Asos swings to profit as turnaround strategy bears fruit

Asos PLC on Thursday reported a swing to profit as the group benefitted from improved gross margins, supply chain efficiency and cost saving measures.

The London-based online fashion retailer reported a swing to annual pretax profit of £24.4 million in the financial year ended August 30, from a loss of £281.6 million a year earlier, despite revenue falling 9.0% to £2.25 billion from £2.48 billion, as it made progress with its turnaround strategy.

Operating profit reached £93.5 million, compared with a loss of £212.3 million, while its adjusted pretax loss narrowed to £46.4 million from £98.2 million.

Adjusted earnings before interest, tax, depreciation and amortisation rose 29% to £170.3 million from £131.6 million. A sharp reduction in inventory, better buying and sourcing, tighter stock management and greater operational flexibility helped improve gross margins and reduce costs.

Gross merchandise value fell 5.0% to £2.35 billion, although it returned to year-on-year growth in the fourth quarter for the first time since financial 2022.

Net debt narrowed to £109.3 million from £184.7 million.

The company said trading in the opening weeks of the new financial year had been "encouraging", despite temporary disruption from a cyber attack on October 6.

Following the attack, the group temporarily paused certain marketing and customer relationship management activity, which it said resulted in a "short-term" disruption to trading, hitting sales, as measured by gross merchandise value, by around 2% to 4%.

Looking ahead, Asos said it expected financial 2027 to mark its first full year of growth since its business transformation, forecasting low-single-digit growth in gross merchandise value, adjusted Ebitda of £180 million to £200 million and positive free cash flow.

Asos said: "We have made substantial progress over the past three years, and we believe there remains significant opportunity to go further through the execution of our strategic plan.

"While the consumer environment remains uncertain, the board is confident that Asos is well positioned to deliver further profitable growth and cash generation in the years ahead as the group continues to execute its strategic plan."

Asos shares rose 0.5% to 424.00 pence on Thursday morning in London.

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