Asos(ASC,), the online fashion retailer, reported huge losses in its results for the six months to 28 February 2023, hit by a tough economic climate and consumers tightening their budgets.
Its adjusted loss before tax came in at £87.4m, compared to a £14.8m profit in the same period last year. Revenues also suffered, down 7% in H1 2023, but the company notes these figures reflected deliberate actions on capital allocation to improve profitability against a challenging trading backdrop.
Sales declined 10% year on year in the UK and 7% in the US, However, ASOS has continued to grow its share of its core UK online retail market among its main 16-35 demographic and has increased its share of its customers' wallets.
In other retail news, Unbound (UBG, ), an online multi-branded retail platform, reported that a funding proposal from Marwyn Investment Management to provide a £10 million investment had been withdrawn, citing principally concerns over current trading. Unbound elaborated that Q1 revenues were lower than previously anticipated in their January trading update, due to an ever-worsening trading environment. As a result, Unbound said it continues to be managing cash flows very tightly given funding constraints.
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Asos and Unbound have both seen shares tumble this morning, falling victim to a challenging economic backdrop and increasing pressures on consumer spending. Asos fell by 11% in early trade, while Unbound plummeted by 62%.
On top of tightened consumer budgets, the online fashion retail sector has been victim to other unfavorable macro conditions that have persisted into 2023 - most notably disruptions to supply chains and depleting customer confidence - with Unbound remaining a notable casualty.
Asos and its competitors such as Boohoo, were once regarded as prime examples of the transition to e-commerce. During the pandemic, these companies enjoyed the advantages of increased online shopping activity, particularly among younger adults who were confined to their homes. Post-lockdown combined with the cost of living continuing to rise has left online retailers feeling the burn, now having to compete once again with high street brands that don't incur shipping costs, alongside contending with higher energy and food prices.
On the upside, Asos CEO José Antonio Ramos Calamonte expressed optimism about the company’s cost-cutting measures that are in place, which are expected to lead to a return to profitability in the second half of the company's 2023 financial year and beyond, showing some hope that Asos might be able to shift the tide once more.
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