ASOS wants its customers back after a year of “substantial change”

The AIM-listed firm reported the expected plunge in full-year profits after its US expansion came with operational issues causing a great deal of disruption

ASOS PLC - ASOS wants its customers back after a year of “substantial change”
The online fashion retailer said it made a “solid start” of the current year

ASOS PLC (LON:ASC) is focusing on getting back those customers who went missing in a year of mishaps and two profit warnings.

The online fashion retailer said it has made a “solid start” of the current year as it set out a plan to remove “non-strategic costs”, increase the product range and keep customers engaged on social media, and is confident on its ability to increase its global scale.

READ: Next, JD Sports and ASOS will gain from next retail shift

The AIM-listed firm reported a 68% plunge in profit before tax to £33mln in the year to 31 August, as expected, after its US and European expansion and automation led to operational issues and a great deal of disruption. Group revenues rose 13% to £2.7bn, in line with consensus forecasts.

The year closed with £90mln of net debt, while last year there was £42mln cash in the bank.

“This financial year was a pivotal period for ASOS, where we have invested significantly and enhanced our global platform capability to drive our future growth. Regrettably this was more disruptive than we originally anticipated,” said chief executive Nick Beighton.

“However, having identified the root causes of our operational issues, we have made substantial progress over the last few months in resolving them.”

He said there remains lots of work to be done to get the business back on track, with disruption in the US warehouse still ongoing, he said “we are now in a more positive position to start the new financial year”.

Positive reaction

Broker Liberum said the "key" question is now whether the group can improve the underlying gross margin percentage after taking a more promotional stance to acquire customers.

"At this stage we would not expect further gross margin dilution, but we also need to consider the risks associated with duties from Turkish, Chinese and EU products into the US and how this landscape may change over the course of the next 12 months," analysts said in a note, upgrading the retailer to 'hold'.

After problems at the Berlin 'Euro Hub' led to the latest profit warning, Peel Hunt felt the key question was whether the warehouses were working properly after their earlier issues. 

"The answer appears to be strongly affirmative. EU next day cut-offs have increased to midnight, availability has improved. The US warehouse is also working well, with clusters delivering next day to key cities."

Peel Hunt added that it expects "a lot of reactivation activity ahead of peak and a fairly significant assault on Black Friday". 

Shares in ASOS, having fallen from highs of close to 8,000p early last year to a little over 2,000p at points this year, were up more than 20% to 3,160p on Wednesday afternoon. 

--Adds broker's comment, updates share price--

Quick facts: ASOS PLC

Price: 2996 GBX

Market: AIM
Market Cap: £2.99 billion

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