ASOS Shares Tumble FY25 Despite Positive Trading Update

ASOS (LON: ASC) shares tumbled on Tuesday after the company released a full-year trading update.

Despite the share price decline, the company signaled significant progress in its multi-year turnaround strategy, achieving substantial profitability improvements. However, ASOS also highlighted lower sales in FY25.

The company’s strategic pivot towards sustainable growth appears to be yielding results, setting the stage for a renewed focus on customer engagement in FY26.

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Gross profit margins increased by approximately 350 basis points year-over-year, fueled by a shift towards full-price sales and reduced markdown activity.

Adjusted EBITDA surged by more than 60% year-over-year, expected to land towards the lower end of the guided £130 million to £150 million range, translating to an adjusted EBITDA margin exceeding 5%, aligning with consensus estimates. The company reported a modest free cash inflow in FY25, surpassing broadly neutral guidance.

This improved profitability stems from successful implementation of a new commercial model and stringent cost efficiencies across the supply chain.

Profit per order increased by approximately 30% year-over-year, highlighting the fundamental reset in unit economics achieved by focusing on sustainably profitable customer relationships. Inventory levels have been dramatically reduced, falling more than 60% since the end of FY22, from £1.1 billion to approximately £400 million.

ASOS is now transitioning to the final phase of its transformation: re-engaging customers. This includes launching new customer experiences like the adidas x ASOS collaboration and the ASOS.WORLD loyalty program in the UK. Expanding Topshop and Topman through new channels also forms a key part of this strategy.

Driver Breakdown:

• Gross Margin Expansion: Focus on full-price sales and reduced markdowns drove significant margin improvement.
• Cost Efficiency: Supply chain optimization, renegotiated distribution contracts, and reduced warehouse footprint contributed to substantial savings.
• Strategic Model Scaling: Test & React and flexible fulfillment models are gaining traction, enhancing agility and efficiency.

ASOS reiterated its medium-term guidance for sustainable adjusted EBITDA growth to a margin of approximately 8%, sustainably ahead of capex, interest, tax and leases as well as expecting a return to revenue growth and improving gross margin towards approximately 50%.