- Launch of Topshop.com, ASOS.WORLD loyalty programme
- Re-iterated full year 2025 guidance
- Artificial intelligence roll-out across the business
Shares in ASOS (ASC) gained 4% in morning trading as the online fast-fashion retailer reported better than expected adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) of £42.5 million for the first half.
Adjusted group revenue for the 26 weeks to 2 March fell 13% to £1.29 billion, continuing the trend in 2024, driven by annualising declines in old inventory.
The company said it will benefit from its new commercial model and reiterated its full year 2025 profitability guidance ‘driven by a significant increase in its full-price sales mix.’
ASOS expects adjusted EBITDA growth of ‘at least’ 60% to between £130 million and £150 million, with revenue growth towards the bottom end of the consensus range.
WHAT DID THE CEO SAY?
ASOS CEO José Antonio Ramos Calamonte remains upbeat about the online fast-fashion retailer: ‘Customers are responding positively to our focus on full-price sales, speed to market, and quality, resulting in a 9% year-on-year increase in ASOS Design sales in the UK, and positive momentum with our partner brands.
‘Importantly, these successes have been achieved whilst maintaining strong cost control and improving our inventory health. We look forward to a fantastic pipeline of new products, brands, and customer experiences, and remain confident in our ability to deliver sustainable, profitable growth.’
RECLAIMING PAST GLORIES
Russ Mould, investment director at AJ Bell said: ‘ASOS is trying to lift the quality as it aims for full-price sales rather than selling lots of discounted goods and the company is looking to recapture its historic reputation for getting the latest styles and trends onto its website quickly.
‘While improvements in underlying earnings are all well and good, ASOS will ultimately be judged on the hard currency of cash, and much will rest on CEO José Antonio Ramos Calamonte’s pledge to generate meaningful free cash flow in 2026.
‘Deliver this and investors may start to see a viable future for ASOS but, after a string of disappointments, any failure to live up to this promise would be received very poorly by the market.’
Analysts at Panmure Liberum are sceptical about the company, saying in a recent research note: ‘Key questions remain as to whether the model can thrive beyond the UK and whether the focus on Test and React is limiting the company’s customer reach – active customers in the UK were down -11%. A return to growth is necessary to support a return to meaningful free cash flow to pay off its still outstanding circa £500 million of debt.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
