Asos Slumps on Weak Earnings Outlook Amid Complex Overhaul
Asos Plc’s shares dropped the most in more than two years after the online fast fashion chain warned its full-year earnings will come in at the lower end of expectations as it works on a complex turnaround plan.
(Bloomberg) -- Asos Plc’s shares dropped the most in more than two years after the online fast fashion chain warned its full-year earnings will come in at the lower end of expectations as it works on a complex turnaround plan.
The British retailer sees adjusted earnings before interest, taxes, depreciation, and amortization toward the bottom of its guidance range of £130 million ($175 million) to £150 million, according to a statement Tuesday. That compares to the analyst consensus of £140 million in a Bloomberg survey. Asos also said sales will be lower than expected as it works on improving profitability.
Shares of Asos fell as much as 13% in early trading in London, the most on an intraday basis since May 2023.
Amid competition from Chinese fast fashion giant Shein, Asos’s turnaround under Chief Executive Officer Jose Antonio Ramos Calamonte is taking longer than expected as the company focuses on reducing costs. The company closed its Atlanta distribution center and instead serves US customers from its warehouse in Barnsley, England to cut costs.
The retailer has also been reducing stockpiles of unsold clothes, writing off an additional £100 million of inventory in November. Over the summer Asos started the last stage of its transformation, seeking to win back shoppers with collaborations with Adidas and expanding the Topshop and Topman brands.
“Asos has dealt with the inventory overhang and introduced a new commercial model but the third leg of re-engaging customers may take longer than expected,” analysts at Deutsche Bank said in a note.
Post-Pandemic Slump
Asos shares have plummeted over 90% in the past four years as pandemic lockdowns ended and shoppers returned to physical stores. Higher UK living costs also focused consumer spending on essentials rather than apparel.
Like other online retailers, Asos has struggled with a high rate of customer returns. In recent months it closed the accounts of shoppers who were returning a large amount of items, triggering a backlash.
Rival Boohoo Group Plc has suffered many of the same issues and reported a record loss last month, with CEO Dan Finley calling it a “very challenging period.” Boohoo is considering selling its Pretty Little Thing brand and assessing options for its warehouses in the US and in Burnley, England.
Boohoo said earlier this year it’s rebranding as Debenhams Group, the department store chain it bought in 2021, and transferring to a marketplace model, selling a range of third-party brands.
(Updates shares in first paragraph, adds context from ninth.)
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