ASOS earnings preview: sales won’t be pretty

ASOS is set to confirm a sharp down in sales next week with the release of interim results for the 26-week period to 3rd March.

The company has already said sales will decline by 18%, so it will be no surprise when they report on 17th April.

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It will be vital to see how they have managed the decline in sales. The company is under pressure to improve stock efficiency, and investors will be closely watching how much of the planned £600m targeted inventory reduction they have completed.

Achieving positive EBITDA for the full year is a big goal for ASOS. Any evidence suggesting they are on track to do this will be well received.

“ASOS has had a tough start to the year. Business transformation plans remain on track, but improving stock efficiency and reducing inventory levels comes at a cost,” said Guy Lawson-Johns, equity analyst, Hargreaves Lansdown.

“Full-year guidance remains unchanged, which includes 5-15% sales declines and positive cash generation. 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. 

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“Active customer numbers will also be in the spotlight. It’s no secret M&S and Next have been growing sales in the third-party brands ASOS is known for, and newer entrants like Temu continue to be a threat. 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.” 

ASOS shares are down 55% over the past year and will likely react positively to any improvements to previous guidance.

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