By James Davey
LONDON (Reuters) -ASOS, one of the pioneers of online fashion retailing, swung to a first-half loss, hit by a squeeze on household budgets and forecast a further drop in sales, sending its shares sharply lower.
The stock was down 11% on Wednesday, extending losses over the last year to 57%, after the company forecast a worse than previously expected “low double-digit” sales decline in its second half.
Sales fell 15% in its second quarter, with that trend continuing into March and April.
ASOS led by CEO José Antonio Ramos Calamonte announced an overhaul of its business model last October. His plan focuses on profitable sales rather than top-line growth.
ASOS forecast second-half core earnings of 40-60 million pounds ($50-$76 million).
“I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond,” Ramos Calamonte said.
ASOS and rival Boohoo grew rapidly as 20-somethings around the world snapped up their fast fashions, and demand surged again during the pandemic when high street rivals were closed.
But supply chain issues, higher product returns, competition from rivals like Shein and a cost-of-living crisis have weighed on their business models.
British households are currently contending with the highest inflation in western Europe, running at 10.1% in March.
“The shares will remain under the shadow of balance sheet concerns until ASOS can demonstrate genuine recovery,” said analysts at Peel Hunt.
ASOS made an adjusted loss before tax of 87.4 million pounds in the six months to Feb. 28, versus a profit of 14.8 million pounds in the same period last year.
Revenue of 1.84 billion pounds was down 10% on a constant currency basis.
Some analysts predict ASOS may need to raise further equity, but Ramos Calamonte told Reuters the company has ample liquidity, ending the half year with cash and undrawn facilities of 408.6 million pounds.
For the full year ASOS forecast a free cash outflow of around 100 million pounds, around the bottom end of previous guidance.
At the statutory level, ASOS reported a first-half pretax loss of 290.9 million pounds, reflecting a 128.2 million pounds stock write-off and other one-time items relating to its restructuring.
($1 = 0.7923 pounds)
(Reporting by James Davey; editing by Sarah Young, Sharon Singleton and Jane Merriman)
