SOS from ASOS, but despite £300m loss and sales warning for 2024, it’s far from sinking

The online fashion giant ASOS has posted a pre-tax loss of £296m and warned of a potential 15% fall in sales next year. However, the home delivery expert ParcelHero says ASOS’ radical supply chain overhaul can restore its fashion star status.

As the e-commerce clothing giant ASOS posts a before-tax loss of £296.7m, the home delivery expert ParcelHero says there’s a risk ASOS could become the next fashion victim. However, ASOS’ radical behind-the-scenes supply chain changes can restore its star status.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘ASOS started life as “As seen on Screen”. Some experts are expressing doubts that the fashion giant will continue to be seen on our PC and mobile screens much longer, as its losses near £300m. More concerning is the news that ASOS is forecasting a further sales decline of 5% to 15% in its next financial year.

‘It’s hard not to think that the online fashion giant expanded too rapidly during the pandemic-era online boom, opening a brand new, state-of-the-art £90m fulfilment centre in Litchfield in 2021 at the height of the e-commerce sales surge.

‘Post-lockdowns, ASOS had to face up to a rapidly changing market. It now has agile and fast-growing online competitors such as Shein and must deal with the resurgence of High Street fashion stores.

‘However, longer term, ASOS’ new “Back to fashion” focus can restore its fortunes, although it’s not going to be a pleasant transition. It’s certainly not shying away from the challenge, quietly announcing it will now sell or mothball its prized new Litchfield warehouse, once it has cleared its hefty backlog of stock. That clearance is now well underway; ASOS has reduced its stock levels by around 30% and cleared 84% of its estimated £1.1bn backlog of stock. However, it admits the final cleansing of stock over its next financial year will remain a drag on sales growth and profitability.

‘Once this has been achieved, however, ASOS will be a significantly leaner operation and far more responsive. For example, its new Test & React plan for certain high fashion products has lead times of just two weeks.

‘Looking at the statement from ASOS’ CEO, José Antonio Ramos Calamonte, the company’s focus is now on a faster supply chain, more responsive to customer demand. Calamonte says ASOS is “focusing on speed and flexibility of intake with better planning; incentivising sell-through in-season; and clearing stock as-we-go to maintain a healthier stock profile.”

‘It’s also been learning lessons from Amazon’s supply chain developments. Says Calmonte: “To increase speed and flexibility with our partner brands, we invested in new technology infrastructure that will enable the rollout of ASOS Fulfilment Services (‘AFS’) to support our stockless Direct to Consumer (‘DTC’) model, Partner Fulfils.”

‘ASOS is also, of course, far from alone in struggling to adapt to a post-Covid market. Pureplay online fashion stores are all reeling. Boohoo will be upset over its pre-tax loss of £9.1m for its latest half-year after its revenue fell 17%. Even Amazon has slashed all but three of its own-label clothing brands to adapt to the changing market.

‘Longer term, ASOS may have done enough to return to buoyancy. It is around 30% bigger than it was in 2019, just pre-Covid, and with 4 million additional active customers. With this in mind, its 2025 plans don’t look unrealistic. It says it will achieve revenue growth and return its margins to around pre-Covid levels of 6%. In the medium term, it believes it can return to double-digit growth. By taking a firm grasp of its logistics and supply chain operations, this should be possible.

‘As retail settles to a new equilibrium, it will be those retailers with strong in-store and online sales that will ultimately triumph in a post-Covid world. ParcelHero’s influential report “2030: Death of the High Street” has been discussed in Parliament. It reveals that, unless retailers develop an omnichannel approach, embracing both online and physical store sales, the High Street as we know it will reach a dead-end by 2030.