ASOS returns to profitability but sales fall 14% in latest quarter

ASOS said core earnings rose more than £20m (€23.4m) in the three months to May 31

The group, whose shares have lost 71% of their value over the last year, had already said last month that sales had fallen about 15%. Photographer: Chris Ratcliffe/Bloomberg

ASOS, the British online fashion retailer, on Thursday reported a 14% drop in revenue in its latest quarter but said its strategy was working as it returned to profitability.

The group, led by CEO José Antonio Ramos Calamonte announced an overhaul of its business model last October after the economic crunch and a string of operational problems hammered its profits. He is prioritising profit over top-line growth.

ASOS said core earnings (adjusted EBIT) rose more than £20m (€23.4m) in the three months to May 31, its fiscal third quarter, with its EBIT margin up 250 basis points.

Profit per order has risen more than 30% so far this year, the company said in a statement, as Asos cuts inventory and boosts its underperforming brands and markets.

The group, whose shares have lost 71% of their value over the last year, had already said last month that sales had fallen about 15% in March and April when it reported a first-half loss and guided to a "low double-digit" sales decline for the second half.

Billionaire shareholders Anders Povlsen, owner of Danish fashion group Bestseller, and Mike Ashley, majority holder of Frasers Group Plc, have raised their stakes in recent weeks.

The overhaul includes reducing stock and excessive discounts, cutting spending and slowing automation in some warehouses. The company expects more benefits to come through in the second half with the business generating cash once more.

ASOS's inventory was down about 15% in the quarter, consistent with its target of a 20% reduction over the full year, with 86% of stock less than 12 months old.

The group kept its forecast for second-half adjusted EBIT of £40-60m.

Reuters and Bloomberg.