The ASOS plc (LON: ASC) share price surged 15.9% after releasing its trading statement for the three months ended 31 May 2023. The fast fashion company generated revenues worth £858.9 million during the quarter compared to £964.1 million in a similar quarter last year.
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The drop in revenues did not trigger a decline in the Asos share price because the company still managed to return to profitability despite the 14% decline in overall revenues. The fashion company attributed its profits to the cost-saving measures it has implemented.
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Asos’ earnings before interest and tax (EBIT) was up over £20 million compared to last year, boosted by an EBIT margin that rose 250bps YoY. The company is on track to deliver adjusted EBIT guidance of £40-60 million in H2 FY23.
The fast fashion retailer noted that it had achieved £200 million in profit optimisation and cost savings year-to-date (YTD) and was on track to deliver approximately £300 million of benefits in the 2023 fiscal year, which equates to about £385 million of gross annualised benefits.
Asos also pointed out that its profits per order had improved by 30% year-to-date compared to last year, driven by specific actions to improve the profitability of underperforming brands and geographies.
The company’s adjusted gross margin was up 350bps YoY, supported by freight (approx. 200bps) and improvements in realised selling value and sourcing. The firm also reported a significant 0.8 million decline in active customers from the 24.9m reported in H1 FY23.
However, the company remained profitable despite the lower customer numbers due to its focus on improving the profitability of sales over the pursuit of growth at any cost. The value and profitability of an average sale made by Asos were much higher than expected.
Asos has a robust balance sheet after raising a long-term financing facility of £275 million and an equity raise of approximately £80 million. The company announced the new funding arrangements and capital raise on 25 May 2023.
The company has also taken significant steps to reduce its inventory levels resulting in over 86% of its inventory being less than 12 months old.
*This is not investment advice.
Asos share price.
The Asos share price surged 15.86% to trade at 380.7p, from Wednesday’s closing price of 328.6p.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.