Online clothing retailer Asos has fallen to an annual loss and warned that the “incredibly challenging” economic backdrop means it will stay in the red over the first half of its new financial year.
Asos has announced pre-tax losses of £31.9m for the year to August 31, compared to profits of £177.1m the previous year. It said the ongoing cost of living crisis meant trading was tougher than expected as shoppers have cut their spending.
The group confirmed it had secured new terms with its lenders on a £350 million borrowing facility after shares slumped on Tuesday as it revealed it was in talks over changes to its financial covenants amid more difficult trading.
READ MORE: Food prices push UK inflation back to 40-year high
Asos, which owns brands including Topshop, said trading had remained volatile since its year-end, with September showing only a “slight” improvement on a difficult August.
And the group predicted the overall clothing market would decline over the next year as the cost-of-living crisis hits consumers hard.
Danish tycoon Anders Holch Povlsen - Scotland's richest man - owns some 25% of Asos. He is now Scotland’s largest landowner, with more than 220,000 acres, and owns Danish fashion retailer Bestseller.
Asos's new chief executive Jose Antonio Ramos Calamonte is overhauling product ranges, but that will lead the group to a first-half loss as it launches discounts to shift clothes. The group added that it will book write-offs of between £100m and £130m from the stock changes, but that this will start to pay off in the second half, when it will also see cost savings and lower shopping costs come through.
Mr Calamonte said: “Against the backdrop of an incredibly challenging economic environment, this unique combination has enabled our business to deliver a resilient performance this financial year in the UK – but I know we as a company can achieve far more.
“Today, I have set out a clear change agenda to strengthen Asos over the next 12 months and reorient our business towards the future.
“This includes a number of decisive, short-term operational measures to simplify the business, alongside steps to unlock longer-term sustainable growth by improving our speed to market, reinforcing our focus on fashion, strengthening our top team, and leveraging data and digital developments to better engage customers.”
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
