ASOS Sees Margin Improvement as Turnaround Efforts Signal Return to Growth

ASOS has released its full-year results, indicating that while the fashion e-tail giant continues to report negative figures, there are clear signs of improvement, notably in its gross margin. The company appears to be moving closer to a return to growth, provided its strategic initiatives continue to yield positive outcomes. The detailed report thoroughly reviewed the company's overall strategy and highlighted various improvements made throughout the period.

Delving into the adjusted figures for the 52 weeks ending in August, Gross Merchandise Value (GMV) registered a 12% decline, settling at £2.456 billion. Adjusted group revenue also saw a drop of 14%, coming in just under £2.465 billion. However, a significant positive was the increase in the adjusted gross margin, which rose to 47.1% from 43.4% in the previous year. Adjusted EBITDA improved notably, climbing from £80.1 million to £131.6 million, though this figure fell slightly below analysts' expectations. Furthermore, the adjusted EBIT narrowed by almost 50% to a loss of £32.2 million, and the adjusted loss before tax improved by nearly 28% to £98.2 million, underscoring progress in reducing losses.

Examining the statutory numbers, group revenue decreased by 15% to just under £2.478 billion. The statutory gross margin demonstrated a strong uplift, reaching 47.1% compared to 40% in the prior year. The operating loss significantly narrowed from almost £332 million a year ago to a loss of just over £212 million this period. Similarly, the statutory loss before tax showed substantial improvement, decreasing from £379 million last year to a loss of just over £281 million.

Looking ahead to the current financial year (FY26), ASOS anticipates an improving GMV trajectory throughout the 12 months, projecting performance to be 3-4 percentage points ahead of revenue performance. This outlook is predicated on the strategic and financial progress made during its turnaround efforts. The company is transitioning to GMV as the primary indicator of its top-line performance, driven by the continued growth of flexible fulfilment models and reflecting its evolving mix. Further gross margin improvement is expected, reaching between 48% and 50%, alongside adjusted EBITDA growth projected to be between £150 million and £180 million.

ASOS has been intensely restructuring its operations to expedite trend delivery. Its "Test & React" model has successfully scaled, now accounting for over 20% of own-brand sales. The partner brand product portfolio has undergone a significant transformation, complemented by the implementation of numerous operational efficiencies and a considerably strengthened balance sheet. The company also highlighted the successful relaunch of the Topshop brands, key leadership appointments throughout the year, and important collaborations, such as the one with Adidas.

For FY26, ASOS's priority is to deepen customer relationships, aiming to evolve into a destination for inspiration and style rather than just a shopping platform. The company is leveraging its distinctive attributes: a unique assortment of the best own-brand and partner brand products, fueled by speed and flexibility, styling that helps customers create beloved outfits, and increasingly personalized experiences. ASOS expressed confidence that the most challenging work is now behind it, setting the stage for future growth.

Reflecting on the past year's performance, the 12% GMV decline was substantial but was a deliberate outcome of actions taken to enhance order profitability amidst a soft consumer backdrop. While top-line performance was lower than expected, the company emphasized an improved quality of sales and an increased full-price mix, with own-brand products also gaining share within the overall mix. Flexible fulfilment models gained significant traction, broadening the product range without adding inventory risk and ensuring GMV growth outpaced revenue growth.

Performance varied across individual markets. In the UK, GMV fell by 7%, with total revenue down 9%. Both visits and orders declined by 12%, and conversion remained flat. However, the average basket value (ABV) increased by 6%. ASOS noted that the UK market demonstrated more resilience compared to other regions during the year, and while active customers declined by 8%, customer retention showed improvement.

Europe experienced a 16% decline in GMV, with total revenue down 19% (or 17% on a like-for-like basis). Visits dropped by 17%, orders by 20%, and conversion decreased by 10 basis points. Conversely, ABV increased by 3% (or 5% like-for-like). The company attributed this performance partly to actions taken to limit unprofitable orders and prevailing macroeconomic pressures.

In the US market, GMV fell by 18%, and total revenue was down 25% (or 22% like-for-like). Visits decreased by 17%, orders by 24%, and conversion by 20 basis points. Consistent with other regions, ABV rose by 4% (or 8% like-for-like). The full-price mix improved in this market, and the rate of decline narrowed significantly from 31% in H1 to 21% in H2.

Across the rest of the world, GMV declined by 15%, with total revenue falling 16% (or 14% like-for-like). Visits dropped by 14%, orders by 17%, and conversion decreased by 10 basis points. ABV in this segment saw a modest increase of 1% (or 3% like-for-like).