Asos shows early signs of brand investment paying off despite sales drop
The fashion retailer’s sales dropped 18% in the six months to 3 March, but it is still on track for profitability, its CEO claims.
By Molly Innes
Asos claims it is making “good progress” in executing its turnaround strategy as the business posts its half-year results.
While sales slumped by 18%, the drop was largely in line with its full-year guidance of between 5% and 15%. At the same time, the business added £20m to its cash balance, bringing it to £330m for the half-year compared with £310m in the same period last year – its strongest half-year cash flow since 2017.
Despite the sales drop, Asos says it expects to hit its profit expectations this year.
This comes after the business announced a £30m investment in brand building in November 2023 to help it return to growth, with a more full-funnel marketing approach after years of focusing on “seductive” performance marketing.
Asos is investing £30m in brand building as it eyes a move away from ‘seductive’ performance marketingAsos tasked itself with turning around its business following a significant drop off post-pandemic. The plan, which it calls the ‘Back to Fashion’ strategy and includes clearing old stock and improving efficiencies, looks to be showing early signs of working: Asos is on track to reduce its inventory to around £600m by the end of the year, it claims.
José Antonio Ramos Calamonte, CEO at Asos, says the firm is “becoming a faster and more agile business”. This is aided, he says, by its team’s “incredible” work to speed up processes to deliver the “fashion, quality and prices” its customers want.
“I’m excited by the performance of our new collections, while we have also made great progress in monetising inventory that built up over the pandemic and in improving the core profitability of our operations,” he adds. “We have reconfirmed our guidance for FY24 as we lay the foundations for a more profitable, cash generative business from FY25 and beyond.”
Asos’s £30m brand-building investment, which saw it release brand platform ‘Asos Your Way’ – its first full-funnel marketing effort – is largely separate from its performance marketing spend, Dan Elton, senior customer director said last year.
Though Elton also said “on the whole, the marketing investment we make will continue to be in performance”. In part, short-term channels are being used to help the retailer shift older inventory as part of its plan to improve profitability.
