12 April 2024 , 14:51
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Asos is set to announce a drop in sales as it grapples with supply chain issues and weak consumer sentiment.
The UK's fast fashion retailers have had a tough couple of years, facing pressure on household budgets and stiff competition from global rivals like Shein and Temu, as well as online marketplaces. Asos shares are currently about 50% lower than they were this time last year.
On Wednesday, April 17, the London-listed company is predicted to report another significant dip in sales as it works to turn its fortunes around. Shore Capital analysts forecast an approximately 18% fall in sales for the half-year to March 3, and predict a 13% drop to £3.08 billion for the current financial year overall.
Last month, Asos attributed the projected sales decrease to its overhaul efforts, having reduced its stock intake by roughly 30% year-on-year to "right size" stock levels. The company has been striving to cut its stock and costs and boost its profitability.
Investors will be hoping that the company can demonstrate that its turnaround plan is beginning to pay off with a positive profit outlook. Analysts believe the company is likely to experience a slowdown in the rate of sales decline over the current half-year due to the turnaround plan.
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However, Shore Capital flagged pressures on Asos from issues such as concerns over supplies, customer confidence remaining guarded, the UK's unpredictable seasonal weather and stiff competition.
It's also been noted that the rise of marketplace platforms like Depop and Vinted appeal to Asos' typical customer base, not to mention the mounting pressure from fast-growing competitors like Shein and Temu. That said, shareholders may draw optimism from recent upbeat trading updates from other UK fashion retailers like Next, suggesting solid consumer spending habits.
Hargreaves Lansdown equity analyst, Guy Lawson-Johns, commented: "Investors will be looking for signs that better times are coming and that a return to growth in the final quarter of this year is still on the cards. Active customer numbers will also be in the spotlight."
He added: "Ultimately, markets are looking for signs that the increased marketing spend and stock rationalisation are being well received by its target audience of fashion-loving 20-somethings."