ASOS shares fall as core customer challenge hits profits and outlook

Shares in ASOS fell 48 per cent yesterday following a profit warning by the online fashion giant, with management admitting its turnaround strategy has temporarily stalled amid shifting sector and consumer trends. At close, the stock was down 14p at 279p, extending year-to-date losses to more than 40 per cent and raising pressing questions about the group’s ability to reignite growth.

ASOS advised that both annual revenue and profit will miss City forecasts after declining to chase low-margin sales in an increasingly competitive and challenging market. The company noted that gross merchandise value would undershoot expectations, with management choosing to prioritise sales of higher quality and price, particularly as consumers tighten their belts in the face of inflation and economic uncertainty.

The City had projected an 84 per cent fall in total sales on a constant currency basis for the year ending September. As a result, ASOS now expects full-year EBITDA to land at the lower end of its previous guidance range of £130 million to £150 million. Since taking the helm in 2022, chief executive José Antonio Ramos Calamonte has focused on shrinking inventory, slashing discounts and deploying a ‘test and react’ commercial model, aiming to bolster profitability even at the expense of volumes.

Evidence of progress had emerged earlier this year, with profitability and the proportion of full-price sales both improving. Despite that, the wider sector malaise—characterised by bearish consumer sentiment and heightened price sensitivity—has weighed on performance. Influential industry voices have suggested the UK fast fashion sector is bordering on recession, while competitors such as H&M, Zara and Primark have all reported headwinds.

ASOS outlined that its next strategic phase will seek to win back the loyalty of core twenty-something customers in its main markets, emphasising brand equity while maintaining operational discipline. Although management maintained confidence in prospects for the 2026 financial year, with earnings and free cash flow forecast to meet expectations, investors remain wary. Deutsche Bank analysts acknowledged the company’s improved inventory balance and commercial discipline but warned the challenge of re-engaging lapsed customers may take longer than initially anticipated. RBC suggested that ASOS’s international markets represent significant potential, but flagged that bolstering brand awareness could require further investment, with possible pressure on returns in the near term.

ASOS must now demonstrate that it can reestablish sales growth without sacrificing its improved margin profile, as scrutiny from both the City and retail rivals will remain intense throughout the coming year.