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Asos PLC on Thursday said revenue and profit margin fell for the four months to December 31, but it has seen ‘encouraging’ gross margin developments.
Asos shares were up 17% trading at 685.00 pence per share on Thursday morning in London.
The London-based online fashion retailer said revenue for the four month period it labels P1 was £1.34 billion, down 4.1% from £1.39 billion a year ago. At constant currency, revenue fell 6%.
The company said the drop in revenue was in line with expectations, ‘reflecting challenging trading conditions and prioritisation of structural profitability improvements and cash generation through a more disciplined approach to capital deployment.’
Asos reported that sales in the UK - the company’s largest market - were £591.3 million, down 8.4% from £645.2 million for the same period last year. In contrast, EU sales were £417.3 million, increasing 6.9% from £390.2 million.
The company said the drop in UK sales was down to weak consumer sentiment, as well as the boost in online retail sales in December 2021 due to the Omicron Covid-19 variant, creating a strong comparative period.
Adjusted gross margin fell by 10 basis points to 42.9%, Asos said. ‘Actions taken on pricing and the reduced use of air freight drove an encouraging progression through the period relative to the prior year,’ the company said.
Asos said adjusted gross margin for the first half of 2023 is expected to be similar to that of P1.
The company added that it expects to post a first half loss, as a result inflation and elevated return rates.
Chief Executive Officer Jose Antonio Ramos Calamonte said: ‘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.’
By Harvey Dorset, Alliance News reporter
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