ASOS faces customer battle as losses narrow and turnround efforts continue

ASOS is intensifying efforts to regain its position as a leading destination for fashion enthusiasts after reporting narrowing losses, despite ongoing pressures on revenue and customer numbers. The online retailer has pivoted its strategy to focus on profitability, which has delivered a reduction in pre-tax losses to £281.6 million for the year ending August, down from £331.9 million the previous year. This progress followed decisive actions to cut costs, mothball its US warehouse, and reduce heavy discounting.

The shift towards full price sales has yielded an improvement in gross margin, up from 43.4 percent to 47.1 percent. However, statutory revenue for the year fell by 15 percent to £2.48 billion, with active customer numbers dropping by 14 percent as ASOS moved away from prioritising volume over margin. Investor sentiment reflected these figures, with shares falling by 9.3 percent to 224 pence on the latest trading day.

Chief Executive José Antonio Ramos Calamonte, who has been steering the turnround since 2022, now faces the critical task of reversing the decline in customer engagement. The company cites that the core demographic of price-sensitive younger shoppers was lured by rivals during the retrenchment from promotions. Despite this, the retailer has observed that those customers who remain are more loyal, spending more and returning fewer items, a sign that the operational overhaul is beginning to take effect.

The company has introduced an AI-driven approach for personalised style recommendations, along with exclusive product collaborations such as the recent partnership with Adidas. Early indicators for the current financial year show a 10 percent increase in new UK customers compared with last year, providing cautious optimism about the broader appeal of ASOS’s renewed proposition.

ASOS’s strategy to limit deep markdowns continues, even as competitors in the ultra-fast-fashion sector and high street retailers attempt to seize market share. Calamonte maintains that aggressive price-based competition will not form part of the recovery plan, stating a commitment to operational discipline over short term promotional tactics. Net debt has been trimmed to £184.7 million, aided by joint ventures and a £238 million refinancing arrangement aimed at reducing interest costs and ensuring long term stability.

Industry analysts highlight the complexity of the current environment, noting intensifying competition, changing consumer behaviour, and persistent economic headwinds. Progress has been noted in profits and debt reduction, but concerns remain about the pace at which the new customer engagement strategy can restore the group’s growth trajectory. Asos’s management remains confident that the changes underway will begin to recalibrate the retailer’s fortunes by creating a more resilient and distinctive business model in a fast-evolving sector.