Asos CEO Optimistic as Brand Investment Begins to Bear Fruit Despite Sales Decline

‘Asos Your Way’

Asos reports that it is moving forward well with its plan to turn things around as it releases its half-year results.

Despite a sales decrease of 18%, the decline fell within the range of its full-year forecast of 5% to 15%. Additionally, the company boosted its cash reserves by £20m, reaching £330m for the half-year, up from £310m in the previous year – marking its best half-year cash flow since 2017.

Asos is confident that it will meet its profit goals for the year, even though there has been a decrease in sales. The company had previously disclosed a £30m investment in brand development in November 2023, aiming to revitalize growth. This shift includes a transition to a more comprehensive marketing strategy, moving away from a sole focus on performance marketing.

Asos is working on a turnaround plan called the ‘Back to Fashion’ strategy. This includes clearing old stock and improving efficiencies. Early signs show that the plan is working, with Asos aiming to reduce its inventory to around £600m by the end of the year.

CEO José Antonio Ramos Calamonte states that Asos is becoming a faster and more agile business. He credits the incredible work of the team in speeding up processes to deliver the fashion, quality, and prices that customers desire.

"We have seen great success with our new collections and have also made significant progress in selling the excess inventory accumulated during the pandemic, as well as enhancing the overall profitability of our operations," he mentions enthusiastically. "We are sticking to our guidance for FY24 as we work towards establishing a more profitable and cash-generating business starting from FY25 and beyond."

Asos's investment of £30m in brand-building, including the launch of the brand platform 'Asos Your Way', marks its first comprehensive marketing effort. This initiative, separate from the performance marketing expenditure, was highlighted by Dan Elton, the senior customer director, last year.

Elton mentioned that the marketing investment will mainly focus on performance. They are using short-term channels to help the retailer sell older inventory and improve profitability.

Editor's P/S:

Despite a challenging retail environment, Asos's half-year results provide cautious optimism. While sales have declined, the company's robust cash position and commitment to its 'Back to Fashion' strategy indicate a path towards profitability. Asos is doubling down on brand development and shifting away from solely performance-based marketing. The launch of 'Asos Your Way' marks a significant investment in its brand identity. As the company focuses on clearing old stock and enhancing operational efficiency, it is poised to emerge as a leaner and more agile business.

Furthermore, Asos's decision to invest in brand-building is a welcome move. By establishing a clearer brand identity and emotional connection with customers, Asos can differentiate itself in the competitive online fashion market. The company's recognition of the importance of storytelling and value-driven marketing signals a shift towards a more sustainable and long-term approach to customer engagement.