Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ASOS PLC (ASOMF, Financial) successfully reduced its stock levels from GBP1.1 billion to GBP520 million, improving cash flow and stock freshness.
- The company achieved a 24% year-on-year increase in performance for new stock, with a 30% faster stock turn, enhancing profitability.
- ASOS PLC (ASOMF) improved its marketing efficiency, increasing return on advertising spend by 18% in the last quarter.
- The company reduced both variable and fixed costs, achieving a 90 basis point reduction in variable costs as a percentage of sales.
- ASOS PLC (ASOMF) strengthened its balance sheet by entering a joint venture with Heartland for Topshop and Topman, and refinancing its convertible bonds.
Negative Points
- ASOS PLC (ASOMF) experienced a 16% decline in sales year-on-year due to lower intake of new products and heavy discounting to clear old stock.
- Gross margins were negatively impacted by markdowns and FX headwinds, with an 80 basis point decline year-on-year.
- The company faced challenges in customer engagement, with reduced order frequency and increased customer churn in the UK.
- ASOS PLC (ASOMF) had to write off GBP100 million of old stock, impacting financial results.
- The US and Rest of World regions experienced more pronounced sales declines due to tougher profit actions.
Q & A Highlights
Q: Could you elaborate on the potential of the Test & React model? Is 30% the ceiling, and why not aim for 100%?
A: Jose Ramos Calamonte, CEO: 30% is our current target, but it could potentially be more. However, it will never reach 100% due to the nature of certain categories that cannot be adapted to Test & React. We are not limiting ourselves and will push as far as possible. The key takeaway is that Test & React is now a reality, not just a project.
Q: How has the ASOS own brand performed compared to non-ASOS brands in terms of gross margin and leftover stock?
A: Jose Ramos Calamonte, CEO: ASOS Design womenswear and menswear have performed well, supported by Test & React. Third-party brands like Mango and adidas have also seen strong sales. Performance is strong on both sides, with no specific issues in any area.
Q: Regarding the Topshop and Topman joint venture, are you expecting revenue growth or changes in distribution?
A: Michelle Wilson, Senior Director of Strategy and Corporate Development: The joint venture with Heartland aims to grow Topshop's presence, particularly in Europe, and includes launching topshop.com. The main impact this year will be structural, with growth expected beyond this year.
Q: With the old inventory now lower and new inventory selling well, why is there a wide range in revenue growth outlook?
A: Dave Murray, CFO: The focus is on sustainable profitability rather than chasing sales. We are confident in delivering the EBITDA range of GBP130 million to GBP150 million, and will not let revenue growth dictate our strategy.
Q: Can you explain the adjusted EBITDA to free cash flow bridge, especially if EBITDA is at the lower end of guidance?
A: Dave Murray, CFO: The bridge includes lease payments and continued working capital improvements. The higher margin from the new commercial model will require fewer units, contributing to working capital benefits, ensuring cash flow neutrality.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
