ASOS festive sales drop as it updates progress on 'Driving Change' agenda

ASOS sales dropped 3% in the four months ending 31 December as the online fashion and beauty retailer was hit by subdued demand in the UK due to funeral of HM the Queen and postal strikes ahead of Christmas.

Total group revenue dropped to £1.34 billion, which it said was in line with expectations, with the UK dropping 8% to £591.3 million due to a sales hit in September due to the Queen's death and disruption from industrial action from the Royal Mail discouraging e-commerce sales.

The retailer also pointed out it was facing tough comparisons to the prior year when sales spiked due the onset of the Omicron COVID-19 variant encouraging e-commerce activity.

EU however sales grew 6%, driven by improved basket economics supported by price increases, and customer growth, with the Netherlands and Ireland notably strong, while US sales fell 2%, with slower wholesale performance acting as a drag on retail sales.

ROW sales fell 10% reflecting implementation of "a range of strategic measures", including a reduction in performance marketing spend to optimise return on investment, and changes to delivery thresholds and charges.

Despite the drop off in sales the business said it was on course to deliver against its 'Driving Change' agenda outlined by CEO José Antonio Ramos Calamonte in the autumn, in which he said ASOS would shift the focus to profitability by measures such as reducing FY22 year-end inventory levels by c.5% by the end of H1 FY23. This was said to be on track.

Other measures in the focus on a 'lighter cost profile' include rationalising office space, winding down ancillary storage, improving marketing efficiency and removing unprofitable brands from the platform.

"We are undertaking necessary strategic and operational changes, with our focus shifting from prioritising top-line growth to building a more relevant and competitive fashion business with a disciplined approach to capital allocation and ROI. At the same time, we are working to reinforce our credibility as a leading destination for our fashion-loving customers.

“We have made good early progress against a number of measures to simplify the business, including re-positioning our inventory profile, reviewing our operational model in our top markets and reducing our cost base. While there is more to do, I am pleased by the progress made in this period and am confident in the direction we are going. We retain ample balance sheet flexibility and reiterate our expectations for FY23," Ramos Calamonte said.

Last month, ASOS named Wei Gao and Marie Gulin-Merle as new Non-Executive Directors, both effective from 1 February 2023.