REG - ASOS PLC - Trading Statement
12/01/2023 07:00
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RNS Number : 4645M ASOS PLC 12 January 2023
12 January 2023
ASOS plc ("the Company")
Trading Statement for the four months ended 31 December 2022 ("P1")
ASOS delivers significant progress on Driving Change agenda in P1
Confident in outlook, with significant improvement in profitability and cash
generation expected in H2 FY23
· Revenue down 3%(1), broadly 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.
· Adjusted gross margin(2) broadly flat with encouraging progress
through the period relative to prior year, with significant improvement
expected in H2 FY23.
· Significant progress made against Driving Change agenda, with
profitability measures identified for FY23 in excess of £300m; majority now
in delivery phase with benefits accelerating in H2 FY23 to more than offset
inflationary headwinds and normalisation of return rates.
· Balance sheet flexibility retained, with cash and undrawn facilities
of c.£430m, in-line with plan and reflecting typical seasonal working capital
flows.
· On track to reduce FY22 year-end inventory levels by c.5% by the end
of H1 FY23, with a further improvement from increased stock turn expected in
H2 FY23.
· Full-year guidance for cash outflow of (£100m) - £0m reiterated.
ASOS continues to expect significantly improved profitability and cash
generation in H2 FY23 and beyond, following H1 FY23 loss.
Four months to 31 December
£m(i) 2022 2021 CCY(ii) change Reported change CCY change ex Russia(iii)
UK total sales 591.3 645.2 (8%) (8%)
EU total sales 417.3 390.2 6% 7%
US total sales 198.1 172.6 (2%) 15%
ROW total sales 129.8 185.1 (31%) (30%) (10%)
Total group revenue(iv) 1,336.5 1,393.1 (6%) (4%) (3%)
( )
(i)All numbers subject to rounding throughout this document, (ii)Constant
currency is calculated to take account of hedged rate movements on hedged
sales and spot rate movements on unhedged sales, (iii)Calculation of metrics,
or movements in metrics, on an ex-Russia basis involves the removal of Russia
from September - December 2021 performance. This adjustment allows
year-on-year comparisons to be made on a like-for-like basis following the
decision to suspend trade in Russia on 2 March 2022, (iv)Includes retail
sales, wholesale and income from other services. All references to segmental
sales throughout the document are total sales unless otherwise stated.
(1)All sales numbers quoted in this statement are at constant currency and
exclude Russia from the FY22 comparative base period unless otherwise stated.
(2)Adjusted gross margin is the reported gross margin excluding the impact of
a provision raised in relation to the previously announced stock write-off of
c.£90m. The final stock write-off is expected to be at the upper end of the
range of £100m-£130m with the balance of the provision expected to be booked
in H1 FY23.
P1 Results Summary
· Revenue decline of 3%, broadly in line with expectations, reflecting
challenging trading conditions and the prioritisation of structural
profitability improvements and cash generation through more disciplined
approach to capital deployment. Trading in the period was volatile and we
expect these trends to continue through this financial year, but basket
economics have proved resilient.
o UK sales down 8%, reflecting weak consumer sentiment. This was
particularly significant in September, which was impacted by national
newsflow, and December, which was affected by disruption in the delivery
market. This resulted in earlier cut-off dates for Christmas and New Year
deliveries, and ASOS reduced marketing spend in response. In addition, there
was a strong comparative period in December 2021, as the Omicron COVID variant
boosted online retail.
o EU sales grew 6%, driven by improved basket economics supported by price
increases, and customer growth, with the Netherlands and Ireland notably
strong.
o US sales fell 2%, with slower wholesale performance acting as a drag on
retail sales.
o 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.
· Active customers(3) flat at 25.5m versus P1 FY22, reflecting the
annualisation of benefits of COVID tailwinds to customer acquisition.
· Whilst adjusted gross margin (excluding the impact of the previously
announced stock write-off) was broadly flat (-10bps to 42.9%), actions taken
on pricing and the reduced use of air freight drove an encouraging progression
through the period relative to the prior year. Reported gross margin declined
by 690bps to 36.1%. A significant improvement in gross margin is expected in
H2 FY23.
( )
(3)Active customers including those in Russia who shopped in the last 12
months as at 31(st) December is 25.8m (as at 31(st) December 2021: 26.7m);
excluding Russia 25.5m (as at 31(st) December 2021: 25.5m)
Driving Change
In October 2022, CEO José Antonio Ramos Calamonte outlined four key actions
to drive rapid improvement in the Company's operations. ASOS has made
significant progress in delivery of these actions in P1 FY23:
· Renewed commercial model:
o Approximately half of the stock units identified for write-off already
physically extracted from ASOS' core network.
o Commercial flexibility strengthened with (i) expansion of Partner Fulfils
from two to 23 brands across the UK and Europe, (ii) technology work for ASOS
Fulfilment Services accelerated and now planned to complete development in H2
FY23, and (iii) trialling 'Test and React' in key categories.
o Growth in full-price sales mix in P1 FY23 resulting from a shift in
approach to clearance, implementing deeper discounts on a narrower range of
assortment. Further improvement anticipated as inventory levels reduce.
· Stronger order economics and a lighter cost profile:
o Identification of profit optimisation and cost mitigation measures with an
estimated FY23 impact in excess of £300m; already in delivery phase, with
benefits to be strongly H2-weighted. These are expected to more than offset
headwinds from inflation and return rates annualisation throughout the year to
generate a modest improvement in full-year profitability (from an expected H1
FY23 loss).
o Examples include:
§ Winding down three ancillary storage facilities (one in Europe, one in the
UK and one in the US) in H2 FY23.
§ Optimising use of the Lichfield fulfilment centre to eliminate UK split
orders.
§ Rationalising office space.
§ Removing 35 unprofitable brands from the ASOS platform by the end of H1
FY23.
§ Implementing low-single digit price increases supporting relative market
positioning for own-brand.
§ Optimising marketing spend and reallocating investment to improve return on
investment.
§ Reducing staff costs by c.10% via previously reported action on headcount.
o A review of order economics in ASOS' largest markets completed; remedial
actions taken to improve profitability in underperforming geographies.
· Robust, flexible balance sheet:
o Balance sheet flexibility retained with cash and undrawn facilities of
c.£430m.
o Return to cash generation in H2 FY23, underpinned by delivery of Driving
Change initiatives.
o On track to reduce FY22 year-end inventory levels by c.5% by end of H1
FY23, with further improvement from increased stock turn expected in H2
FY23.
o Capex has been scaled back and re-prioritised in line with full-year
guidance.
· Reinforced leadership team and refreshed culture:
o Management team strengthened by appointment of Christoph Stark as Group
Director of Supply Chain in January 2023. Christoph brings wealth of
experience in supply chain, logistics and fulfilment from high-profile online
retailers including Wayfair and Zalando.
o ASOS Board bolstered by appointment of Wei Gao and Marie Gulin-Merle as
Non-Executive Directors. Mai Fyfield appointed Chair of Remuneration
Committee.
o Meaningful progress on embedding reinvigorated culture, built on
simplicity, transparency, operational effectiveness, and innovation.
Outlook
· Guidance for full-year free cash flow of (£100m) - £0m remains
unchanged.
· Adjusted gross margin, and cash and undrawn facilities at H1 FY23
expected to be similar to P1 FY23.
· ASOS continues to expect H1 FY23 loss, driven by usual profit
phasing(4), headwinds from inflation and annualisation of elevated return
rates. These headwinds are expected to persist into H2 FY23 but will be more
than offset by accelerating benefits from Driving Change agenda and previously
highlighted tailwind from freight.
(4)Usual profit phasing pre-pandemic (i.e. pre-FY21).
José Antonio Ramos Calamonte, Chief Executive Officer, said:
"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."
Investor and Analyst conference call:
ASOS will be hosting a conference call for analysts and investors at 8.30am
(UK time) on 12(th) January 2023. To access live please dial 0800 640 6441 /
+44 20 3936 2999, and use passcode: 535936
A recording of this webcast will be available on the ASOS Plc website later
today: https://www.asosplc.com/investor-relations/
For further information:
ASOS Tel: 020 7756 1000
plc
Jose Antonio Ramos Calamonte, Chief Executive Officer
Katy Mecklenburgh, Interim Chief Financial Officer
Taryn Rosekilly, Director of Investor Relations
Holly Cassell, Head of Investor Relations
Katja Hall, Director of Corporate Affairs
Website: www.asosplc.com/investors
Headland Consultancy Tel: 020 3805 4822
Susanna Voyle / Stephen Malthouse
JPMorgan Cazenove
Tel: 020 7742 4000
Bill Hutchings / Will Vanderspar
Numis Securities Tel: 020 7260 1000
Alex Ham / Jonathan Wilcox / Tom Jacob
Berenberg Tel: 020 3207 7800
Michelle Wilson / Richard Bootle
Background note
ASOS is a destination for fashion-loving 20-somethings around the world, with
a purpose to give its customers the confidence to be whoever they want to be.
Through its app and mobile/desktop web experience, available in ten languages
and in over 200 markets, ASOS customers can shop a curated edit of over 70,000
products, sourced from nearly 900 global and local third-party brands
alongside a mix of fashion-led own-brand labels - ASOS Design, ASOS Edition,
ASOS 4505, Collusion, Reclaimed Vintage, Topshop, Topman, Miss Selfridge and
HIIT. ASOS aims to give all of its customers a truly frictionless experience,
with an ever-greater number of different payment methods and hundreds of local
deliveries and return options, including Next-Day Delivery and Same-Day
Delivery, dispatched from state-of-the-art fulfilment centres in the UK, US
and Germany.
Forward looking statements:
This announcement may include statements that are, or may be deemed to be,
"forward-looking statements" (including words such as "believe", "expect",
"estimate", "intend", "anticipate" and words of similar meaning). By their
nature, forward-looking statements involve risk and uncertainty since they
relate to future events and circumstances, and actual results may, and often
do, differ materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with respect to
future events as at the date of this announcement. Save as required by
applicable law, the Company undertakes no obligation to publicly revise any
forward-looking statements in this announcement, whether following any change
in its expectations or to reflect events or circumstances after the date of
this announcement.
Appendix 1 - Total sales growth by period in sterling, including Russia
Year ending 31 August 2023
£m P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2022/23 YTD YOY%
UK total sales 591.3 (8%) 591.3 (8%)
EU total sales 417.3 7% 417.3 7%
US total sales 198.1 15% 198.1 15%
ROW total sales 129.8 (30%) 129.8 (30%)
Total sales(3) 1,336.5 (4%) 1,336.5 (4%)
Year ended 31 August 2022 ( )
P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2021/22 YOY%
£m
UK total sales 645.2 13% 250.3 (2%) 431.8 4% 435.5 6% 1,762.8 7%
EU total sales 390.2 (3%) 187.2 (3%) 294.0 (5%) 298.6 6% 1,170.0 (1%)
US total sales 172.6 7% 80.1 13% 141.9 21% 136.8 18% 531.4 14%
ROW total sales 185.1 (20%) 93.4 1% 96.4(2) (33%) 97.4 (30%) 472.3 (22%)
Total sales(3) 1,393.1 2% 611.0 -% 964.1(2) (2%) 968.3 2% 3,936.5 1%
Year ended 31 August 2021
P1(1) YOY% P2(1) YOY% P3(1,4) YOY% P4(1,4) YOY% 2020/21 YOY%
£m
UK total sales 571.3 35% 254.5 46% 415.9 85% 410.3 5% 1,652.0 36%
EU total sales 400.6 18% 193.8 22% 310.1 33% 280.8 (6%) 1,185.3 15%
US total sales 161.7 12% 71.2 8% 117.5 25% 115.8 4% 466.2 12%
ROW total sales 230.5 16% 92.3 1% 144.5 2% 139.7 (19%) 607.0 1%
Total sales(3) 1,364.1 23% 611.8 25% 988.0 43% 946.6 (3%) 3,910.5 20%
(1)Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: three months to 31 May
P4: three months to 31 August
(2)In the tables above RoW and Group total sales for P3 have been restated.
This restatement relates to the removal of the £19.3m gain on RUB hedges,
which was reported as revenue at P3 but subsequently reallocated to other
income at year-end 2022.
(3)Includes retail sales, wholesale and income from other services comprising
delivery receipt payments, marketing services and commission on
partner-fulfilled sales
(4)P3 is restated to reflect only March, April, and May. P4 has been restated
to include June.
Appendix 2 - Total sales growth by period at constant currency, including
Russia
Year ending 31 August 2023
£m P1(1) P2 (1) P3 (1) P4 (1) 2022/23
YOY% YOY% YOY% YOY% YOY%
UK total sales (8%) (8%)
EU total sales 6% 6%
US total sales (2%) (2%)
ROW total sales (31%) (31%)
Total sales(3) (6%) (6%)
Year ended 31 August 2022
P1(1) P2 (1) P3 (1) P4 (1) 2021/22
£m YOY% YOY% YOY% YOY% YOY%
UK total sales 13% (2%) 4% 6% 7%
EU total sales 2% 1% (2%) 9% 2%
US total sales 11% 12% 15% 4% 10%
ROW total sales (15%) 2% (33%)(2) (31%) (20%)
Total sales(3) 5% 1% (2%)(2) 1% 2%
Year ended 31 August 2021
P1(1) P2 (1) P3 (1,4) P4 (1,4) 2020/21
£m YOY% YOY% YOY% YOY% YOY%
UK total sales 35% 46% 85% 5% 36%
EU total sales 17% 20% 34% (7%) 15%
US total sales 16% 13% 40% 15% 21%
ROW total sales 20% 9% 10% (14%) 6%
Total sales(3) 24% 26% 47% (1%) 22%
(1)Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: three months to 31 May
P4: three months to 31 August
(2)In the tables above RoW and Group total sales for P3 have been restated.
This restatement relates to the removal of the £19.3m gain on RUB hedges,
which was reported as revenue at P3 but subsequently reallocated to other
income at year-end 2022.
(3)Includes retail sales, wholesale and income from other services comprising
delivery receipt payments, marketing services and commission on
partner-fulfilled sales
Appendix 3
Total sales growth by period in sterling, excluding Russia
Year ending 31 August 2023
£m P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2022/23 YTD YOY%
UK total sales 591.3 (8%) 591.3 (8%)
EU total sales 417.3 7% 417.3 7%
US total sales 198.1 15% 198.1 15%
ROW total sales 129.8 (9%) 129.8 (9%)
Total sales(3) 1,336.5 (1%) 1,336.5 (1%)
Year ended 31 August 2022 ( )
P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2021/22 YOY%
£m
UK total sales 645.2 13% 250.3 (2%) 431.8 4% 435.5 6% 1,762.8 7%
EU total sales 390.2 (3%) 187.2 (3%) 294.0 (5%) 298.6 6% 1,170.0 (1%)
US total sales 172.6 7% 80.1 13% 141.9 21% 136.8 18% 531.4 14%
ROW total sales 142.0 59.7 96.4(2) (7%) 97.4 (3%) 395.5
Total sales(3) 1,350.0 577.3 964.1(2) 2% 968.3 7% 3,859.7
Total sales growth by period at constant currency, excluding Russia
Year ending 31 August 2023
£m P1(1) P2 (1) P3 (1) P4 (1) 2022/23
YOY% YOY% YOY% YOY% YOY%
UK total sales (8%) (8%)
EU total sales 6% 6%
US total sales (2%) (2%)
ROW total sales (10%) (10%)
Total sales(3) (3%) (3%)
Year ended 31 August 2022
P1(1) P2 (1) P3 (1) P4 (1) 2021/22
£m YOY% YOY% YOY% YOY% YOY%
UK total sales 13% (2%) 4% 6% 7%
EU total sales 2% 1% (2%) 9% 2%
US total sales 11% 12% 15% 4% 10%
ROW total sales (7%)(2) (4%)
Total sales(3) 2%(2) 6%
( )
(1)Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: three months to 31 May
P4: three months to 31 August
(2)In the tables above RoW and Group total sales for P3 have been restated.
This restatement relates to the removal of the £19.3m gain on RUB hedges,
which was reported as revenue at P3 but subsequently reallocated to other
income at year-end 2022.
(3)Includes retail sales, wholesale and income from other services comprising
delivery receipt payments, marketing services and commission on
partner-fulfilled sales
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