Asos chief executive José Antonio Ramos Calamonte is confident his turnaround plan will see the struggling fashion giant return to profitability in 2025 – despite, it plunging to an almost £300m full-year loss.
Despite the eye-watering losses, he remains upbeat and says that the retailer has made “good progress” and, after spending most of the year cost-cutting and driving efficiencies, it is “ending the year smaller, but inherently a more profitable business”.
The online fashion giant is anticipating another difficult year ahead, forecasting a decline in sales between 5% to 15% as it looks to offload old stock, however, Calamonte’s focus is now turning to getting the business back to profit by 2025.
He plans to do this by a shift “back to fashion”. But what exactly does this entail?
Back to its roots
After resetting its commercial model to focus on profitability and clearing old stock, Calamonte’s next steps will see Asos return to its roots of “bringing the most relevant fashion product to consumers”, with an emphasis of “moving faster in everything we do”.
The retailer is already acting on its promise with the introduction of its new ‘test & react’ model, which has shortened lead times between design and production to around two weeks.
Asos expects the model to be scaled to over 10% of its own brand by the end of its current financial year.
GlobalData senior apparel analyst Pippa Stephens says: “The new test & react model has seen pleasing results so far, with styles experiencing faster sell throughs.”
Stephens adds that expanding the model will “enable it to better compete” with the likes of Shein, which the retailer has found itself losing out to.
Asos says it will continue the clearance of old stock, having shifted 84% of the £1.1bn of stock it carried forward in the year.
Calamonte says: “We’re going to accelerate the cleansing of old stock and to be honest, Black Friday is a great opportunity to do so.”
However, the retailer warns the remainder of unsold units will “drag on both sales and profitability for the year”.
Can Asos win back its customers?
Asos admits its emphasis on profitability and cost-cutting over the last year has negatively impacted active customer numbers.
The fashion retailer lost 2.2m customers across the year, which it attributed in part to the removal of a number of “unprofitable” shoppers that were costing the business more than £100m.
Despite the 17% decrease, the retailer says its 23m remaining customers “are more profitable”.
The retailer has been forensic over order profitability over the past year and has boosted this by more than 30%.
Calamonte says he’s now keen for the business to “strengthen [its] relationship with customers”.
This includes upping the retailer’s marketing spend by £30m to “reignite the brand” and attract back its fashion-loving 20-something audience.
The retailer released its ‘Asos Your Way’ multichannel brand campaign today, which celebrates and highlights individual styles.
Savvy Marketing chief executive Catherine Shuttleworth praises the new strategy but warns a challenge will be in what channels it uses to communicate with its customers.
“This generation looks for their fashion inspiration and their lifestyle inspiration on TikTok, not Instagram.
“Asos were brilliant on Instagram but you’ve got a market that is moving to different platforms, and it’s more fragmented.”
The retailer has quite a bit of catching up to do if its looking to get its 2m TikTok following anywhere near its 14.8m fan base on Instagram.
Could Asos sell Topshop?
After notching up nearly £300m of statutory losses, Asos’ balance sheet could do with some shoring up and reports emerged late last week that the retailer was weighing up a sale of Topshop, which it acquired in 2021.
Calamonte declines to comment on the speculation – “we don’t comment on rumours” – but says that he is “very happy” with how the brand is performing.
“Topshop is one of the top brands in terms of performance. Last fiscal year, we saw growth and improvement in profitability.”
He adds: “It is performing very well. We’re very happy with it.”
Stephens says that the brand fits well with Asos’ other ranges and resonates with slightly older shoppers who grew up buying Topshop.
However, Shuttleworth argues that the much loved high street brand hasn’t received “nearly enough” investment under Asos.
“The business has had too many of the things on its plate and its missed the opportunity with Topshop.”
The sale of one of the retailer’s best performing brands seems like an unlikely move as it now focuses on growing sales and strengthening its relationship with customers.
However, Stephens says that if the transaction does go ahead, the move would fit into Calamonte’s attempt to recover profitability.
Will it work?
Calamonte has set ambitious targets for the year ahead with the aim of returning to growth in the final quarter of its current financial year.
This will be no easy task for the Asos boss as investors are “unlikely to believe it until they see it”, says Wealth Club quality shares portfolio manager Charlie Huggins.
He says the year ahead is likely to another “very painful” one as the retailer “remains in intensive care” in its hunt to recover its fortunes.
“The past year has been another annus horribilis, but then again it was always going to be. You cannot perform major surgery on a broken business without taking considerable pain.
The biggest uphill battle for Asos now, Shuttleworth explains, is “making it relevant to their shoppers now and refreshing it for the younger shopper who is attracted by other things”.
Calamonte has laid out how he plans on “regaining the hearts and minds of the target consumer”. Let’s hope the fashion giant can reignite interest and the original online fashion disruptor can fight back against the new generation of fast fashion firms.
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