TIDMASC
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 GBP300m;
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.GBP430m, 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 (GBP100m) - GBP0m
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
CCY(ii) Reported CCY change
GBPm(i) 2022 2021 change 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) Co nstant 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.GBP90m. The final stock write-off is
expected to be at the upper end of the range of GBP100m-GBP130m
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 GBP300m;
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.GBP430m.
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 (GBP100m) - GBP0m 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 plc Tel: 020 7756 1000
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
2022/23
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 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
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2021/22 YOY%
------- ----- ------- ----- --------
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%)
964.1
Total sales (3) 1,393.1 2% 611.0 -% (2) (2%) 968.3 2% 3,936.5 1%
------- ----- ------- ----- --------
Year ended 31 August 2021
GBPm P1(1) YOY% P2(1) YOY% P3(1,4) YOY% P4(1,4) YOY% 2020/21 YOY%
------- ----- ------- ------- --------
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
GBP19.3m 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
P1 (1) P2 (1) P3 (1) P4 (1) 2022/23
GBPm 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
GBPm 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
GBPm 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
GBP19.3m 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
2022/23
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 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
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2021/22 YOY%
------- ----- ------- ----- --------
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 964.1
(3) 1,350.0 577.3 (2) 2% 968.3 7% 3,859.7
------- ----- ------- ----- --------
Total sales growth by period at constant currency, excluding
Russia
Year ending 31 August 2023
P1 (1) P2 (1) P3 (1) P4 (1) 2022/23
GBPm 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
GBPm 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
GBP19.3m 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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