Company Announcements

10 May 2023                                                                                                     

ASOS plc ("the Company")

Global Online Fashion Destination

Interim Results for the six months to 28 February 2023

Executing on Driving Change agenda, creating strong foundations for a return to profitability and cash generation in H2 FY23 and beyond

Summary financial results

Strategic Update

·       Despite the ongoing challenges in the operating environment, ASOS is on track to deliver full year targets of:

o  Over £300m of Driving Change agenda benefits, with over £100m delivered in H1. Actions already taken will drive more than 95% of c.£200m profitability benefits expected in H2 FY23;

o  Inventory reduction of c.20% year-on-year ('YoY'), with 9% reduction vs FY22 achieved in H1, slightly ahead of plan;

o  Adjusted gross margin improvement of c.100bps, with recent run-rate up more than 300bps YoY;

o  Profitability and cash generation in H2 FY23 and beyond, with £40-60m adjusted earnings before interest and tax ('EBIT') and over £150m free cash inflow⁷ in H2 FY23;

·       Robust and flexible balance sheet with an amendment and extension of existing £350m revolving credit facility ('RCF') through to November 2024. The facility steps down over the term, reducing to £220m by August 2024. The Company had cash and undrawn facilities over £400m at 28 February 2023.

·       Refreshed management team, with newly formed Management Committee now largely complete.

·       ASOS remains focused on executing the final stages of its Driving Change agenda, creating strong foundations for its next phase of growth. 

H1 Results Summary

·      Revenue⁸ declined by 7% (down 8% on a reported basis) in H1 FY23 and 15% in P2 FY23, reflecting both deliberate actions on capital allocation to improve profitability and a challenging trading backdrop. The actions taken account for broadly 50% of the revenue decline since December but are driving improving order economics.

·      Sales momentum in January and February reflected: (1) planned profitability actions including reduced markdown, discipline on marketing spend and country-specific proposition changes; (2) reduced width in the assortment as the Company took decisive action to right-size stock; and (3) a challenging online retail environment as online penetration declined YoY - although remaining notably higher than pre-pandemic.

·    UK sales were down 10% YoY, Europe flat, US down 7% and Rest of World down 12%. Variation in performance reflects regional differences in the economic backdrop as well as country-specific profit actions taken by the Company in-line with its focus on profitability over top-line growth. The regional trends in sales growth were reflected in active customer numbers in the period. 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' wallets⁹.

·      Adjusted gross margin¹⁰ was broadly flat, both YoY and from P1 FY23, at 42.9%. It showed encouraging progress over the period, with February adjusted gross margin up more than 300bps YoY and sustained through March and April, supported by lower freight and duty rates.

·      Stock has been reduced by 9% from the level reported at FY22, slightly ahead of the 5% H1 FY23 reduction planned at the time of the P1 FY23 update.

·      H1 FY23 adjusted EBIT loss was £69.4m and adjusted loss before tax was £87.4m. Actions taken under the Driving Change agenda had a positive profit impact of more than £100m, partially offsetting anticipated headwinds of c.£180m (predominantly from inflation and normalisation of return rates).

·      The reported loss before tax of £290.9m includes £203.5m of adjusting items, primarily relating to the execution of the Driving Change agenda. These include £128.2m relating to the previously announced stock write-off and £49.4m of non-cash property impairments and closure costs relating to the reduction of the Company's head office and logistics footprint. The cash outflow relating to adjusting items in the period was £23.0m. Further detail on the adjusting items is included in note 3 on pages 23-26.

·      Free cash outflow¹¹ for the half was £262.7m mainly driven by the reported loss in the period, H1-weighted historical committed capex investment of £115.0m and the phasing of stock receipts and payments, with the cash benefit associated with the lower H1 intake expected in H2 FY23.

·       ASOS ended H1 FY23 with cash and undrawn facilities totalling £408.6m at what is typically the seasonal trough in its net working capital cycle.

Current Trading & Outlook

·      Sales momentum in P2 FY23 (-15% CCY ex-Russia) has broadly continued into March and April with approximately half of the sales decline driven by planned Driving Change initiatives. However, with adjusted gross margin run rate up more than 300bps YoY, adjusted gross profit was broadly flat YoY over the same period, reflective of the prioritisation of profitability over growth.

·      ASOS will retain its focus on profitable sales in H2 FY23 and its commitment to exit the year with a cleaner inventory position. If there is no improvement to the external trading environment, expectations for H2 FY23 are:

o  Sales (CCY ex-Russia) decline of low double-digit YoY;

o  Adjusted gross margin up c.200bps YoY;

o  Inventory reduction of c.20% YoY;

o  Adjusted EBIT of £40-60m, adjusted EBIT margin c.3%;

o  Free cash inflow of over £150m, excluding all incremental refinancing costs (interest, arrangement and advisor fees). This equates to over £125m free cash inflow including refinancing costs;

o  Capex of £60-85m (in-line with FY23 guidance of £175-200m);

o  Interest expense of c.£30m, including amortisation of arrangement fees and related costs;

o  EBIT impact of adjusting items in the range of £25m-£30m in H2 FY23, of which £15m is non-cash (mostly relating to the Driving Change agenda).

·      For FY23, free cash outflow (prior to incremental refinancing costs) will be around £100m (i.e. around the bottom end of the £0 to £100m outflow guidance provided at FY22).

José Antonio Ramos Calamonte, Chief Executive Officer said:

"Our focus is on improving our core profitability, prioritising order economics over top-line growth and I am pleased with the strategic and rapid operational progress the business has made in the first half of the financial year, against some very challenging trading conditions. Thanks to the hard work and commitment of our teams, we have accelerated the roll-out of our new commercial model, delivered more than £100m of profit optimisation and cost saving initiatives, extended our financing facility and continued to build out our top team while remaining committed to our Fashion with Integrity agenda. Taken together, these measures will create a more sustainably profitable and cash generative business as we reinforce our position as a leading destination for our fashion-loving customers.

"While some of these changes have impacted short-term sales growth, there are many causes for optimism as we progress through the second half of the year. We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile, and are taking action to reduce the proportion of our sales which are not profitable. Initiatives are in place to drive a further c.£200m of benefit in the second half and I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond."

The amendment and extension to Revolving Credit Facility agreed with the Company's banking syndicate constitutes inside information. This announcement therefore includes inside information.

The person responsible for arranging the release of this announcement on behalf of ASOS is Emma Whyte, General Counsel and Company Secretary.

Notes

¹ All numbers subject to rounding throughout this document.

² Constant currency is calculated to take account of hedged rate movements on hedged sales and spot rate movements on unhedged sales.

³ Calculation of metrics, or movements in metrics, on an ex-Russia basis involves the removal of Russia from H1 FY22 performance. This adjustment allows YoY comparisons to be made on a like-for-like basis following the decision to suspend trade in Russia on 2 March 2022.

⁴ Excludes one-off jobber income in relation to the stock write-off program of £2.1m in H1 FY23. Further detail on the adjusting items can be found in note 3 on pages 23-26.

⁵ Includes retail sales, wholesale and income from other services.

⁶ Definitions of the adjusted performance measures used above and throughout this document can be found on pages 45-46.

⁷ Free cashflow guidance is excluding all incremental refinancing costs (interest, arrangement and advisor fees).

⁸ All sales numbers quoted in this document are at constant currency and exclude Russia from the H1 FY22 comparative base period unless otherwise stated.

⁹  Share of UK online retail market based on Kantar | Total Market | Total Clothing, Footwear and Accessories | 16-35 year olds |  Market Shares | 24 w/e 5th March 2023 vs LY, share of customers' wallets based on Kantar | ASOS Shoppers | Online | Spend % I 24 w/e 5th March 2023 vs LY.

¹⁰ Excluding the gross profit impact of the stock write-off of £119.7m announced at FY22 and non-underlying sales tax of £4.9m. Reported gross margin of 36.1% (down 700bps YoY). Further detail on adjusting items can be found in note 3 on pages 23-26.

1¹ Definition of free cash outflow can be found on pages 45-46.

Investor and analyst meeting:

The Company will be hosting an in-person presentation for analysts and investors at 9.00am at ASOS HQ, Greater London House, NW1 7FB. For those unable to attend in person a live webcast will be available, and a recording of the presentation will be uploaded to the ASOS investor relations website afterwards.

To access live please dial +44 203 901 7895  and use Meeting ID: 882 4156 1706 and passcode: 747285. A live stream of the event will be available here.

A recording of this webcast will be available on the ASOS Plc investor centre website after the event: https://www.asosplc.com/investor-relations/

For further information:

Background note

ASOS is a destination for fashion-loving 20-somethings around the world, with a purpose to give its customers the confidence to be whoever they want to be. Through its app and mobile/desktop web experience, available in nine languages and in over 200 markets, ASOS customers can shop a curated edit of over 60,000 products, sourced from nearly 900 global and local third-party brands alongside a mix of fashion-led own-brand labels - ASOS Design, ASOS Edition, ASOS 4505, Collusion, Reclaimed Vintage, Topshop, Topman, Miss Selfridge and HIIT. ASOS aims to give all of its customers a truly frictionless experience, with an ever-greater number of different payment methods and hundreds of local deliveries and return options, including Next-Day Delivery and Same-Day Delivery, dispatched from state-of-the-art fulfilment centres in the UK, US and Germany.

Forward looking statements:

This announcement may include statements that are, or may be deemed to be, "forward-looking statements" (including words such as "believe", "expect", "estimate", "intend", "anticipate" and words of similar meaning). By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances, and actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Save as required by applicable law, the Company undertakes no obligation to publicly revise any forward-looking statements in this announcement, whether following any change in its expectations or to reflect events or circumstances after the date of this announcement.

ASOS plc ("the Company")

Global Online Fashion Destination

Interim Results for the six months to 28 February 2023

CEO Review

In my inaugural ASOS results announcement last October, I set out a frank assessment of the Company's many strengths, but also some areas where our performance was lacking. This is an incredible business with a compelling brand, customer offer and fashion credibility. The opportunity is in improving the way we operate, including delivering on our Fashion with Integrity programme on which we have published our second annual progress report. This diagnosis resulted in our Driving Change agenda, an action plan to accelerate the changes needed to transform ASOS into a sustainably profitable and cash generative business, built on four key principles: simplicity, speed to market, operational excellence; and flexibility and resilience. The economic environment we are operating in is extremely challenging, but I am delighted with the commitment and dedication of the ASOS team to deliver on our plan. The Driving Change initiatives implemented to date have generated more than £100m of benefit in H1 FY23 and created a strong foundation for ASOS' return to profitability in H2 FY23 and beyond. Indeed, more than 95% of the c.£200m of benefits expected in H2 FY23 are based on initiatives already in place.

Revenue declined 7%¹ YoY in H1 FY23 to £1,840.6m (down 8% on a reported basis²). This performance reflects both a challenging trading environment and the impact of profitability actions taken under the Driving Change agenda, largely since December. We remain convinced these measures are the right ones to achieve our ambition to become a sustainably profitable, cash generative business in the longer term and we have already seen order economics improve as a result. We are making these changes at the same time as our customers are feeling the squeeze financially and in the short-term are returning to physical stores post-pandemic. However, on a three-year view online penetration has increased substantially, and we remain confident in the structural drivers underpinning continued growth in the online channel in the medium term. In the meantime, we have grown our share of the 16 to 35 online retail market in the UK, maintaining our market leading position as our proposition continues to resonate with our core consumer. The strength of our offer is perhaps best reflected by the performance of the Topshop brand, which has delivered retail sales growth of 12%³ YoY and a higher margin than the Company average.

A detailed update of our progress against our Driving Change agenda is covered in the following pages.

i.          Renewed commercial model

The new commercial model comprises a comprehensive change in ASOS' approach to buying and merchandising, improved stock management discipline and reduced complexity in our logistics network to ensure that its fashion-loving 20-something core customer base is exposed to cutting edge fashion curated in ASOS' own unique way. The benefits of this are twofold: a more engaging customer experience with exposure to more inspirational, relevant product; and a higher proportion of more profitable full-price sales.

Current product lead times mean there is a lag between operational change and visible results. However, over the period ASOS has taken decisive action aimed at simplifying the product journey, including increasing flexibility in its buying processes, re-setting its stock profile and closing ancillary warehouse space. Encouragingly, there was positive progression in underlying gross margin through the half. While the sales outlook for the year is more challenging than initially anticipated, the current adjusted gross margin run rate is up more than 300bps YoY and provides headroom for ASOS to take action if necessary to ensure it exits the year with a significantly improved stock profile, thus laying the foundations for FY24. 

¹ Total revenue CCY excluding Russia declined by 7% (down 10% CCY including Russia).

² Total reported revenue including Russia declined by 8% (down 5% on a reported basis excluding Russia).

³ Topshop brand sales on the ASOS.com platform growth of 12% (excluding Russia) and 10% (including Russia).

Stock profile

To facilitate the introduction of the new model, ASOS is taking action to right-size its stock profile in three phases:

1.       Stock write-off: At the FY22 results announcement, a non-underlying stock write-off of up to £130m was announced, taking decisive action to clear excess stock and deliver more efficient use of the Company's warehouse network. C.90% of the stock identified for write-off has now been extracted from the ASOS core network, enabling the implementation of supply chain efficiency initiatives under the Company's programme of cost saving measures described under pillar ii) below.

2.       Spring / Summer intake: With the new commercial model initiated part-way through the Spring/Summer '23 buying cycle, the opportunity to reduce intake was predominantly via a reduction in the number of options. This has had a negative impact on current trading which is expected to continue through the remainder of the Spring / Summer season (i.e. the remainder of FY23) but will drive the planned c.20% reduction in stock by the end of the financial year.

3.       Autumn / Winter intake: Looking ahead to Autumn/Winter '23, the principles underpinning the new model will be manifested in full. The newly formed central merchandise planning team is driving a more dynamic approach to stock management, facilitating a reduction in intake volumes while restoring width to the assortment. This approach is intended to increase stock turnover to pre-pandemic levels by the end of FY24.

Flexibility in the assortment

In the longer term, improved relevance and hence full-price sell-through are achieved by increasing flexibility in the ASOS product assortment. On its own-brand offer, the Company is currently running a 'Test and React' pilot using UK suppliers across a small number of product lines. The purpose of this pilot is to stress test ASOS' ability to reduce product lead times from concept to site to c.2 weeks in certain circumstances. For partner branded product, the Partner Fulfils model will play a strategic role by increasing the range and depth of products for sale without an associated stock risk for the Company. This will be particularly valuable in product categories with longer lead times such as sportswear. The Company has continued to build out the functional capability of the Partner Fulfils platform to enable the addition of more brands and services in H2 FY23 and beyond. Additional technology capabilities have also increased automation in the onboarding process, making for a more streamlined experience for ASOS' partners. 24 Partner Fulfils brands are currently live in the UK and Europe.

ii.         Stronger order economics and a lighter cost profile

In parallel with changes to the commercial model, the Company also set out plans to optimise its cost base, improving order economics and maximising operating model efficiency to ensure a sustainable level of profitability and cash generation is achieved in all markets. At P1 FY23, a comprehensive package of profit optimisation and cost mitigation initiatives was announced under the Driving Change agenda with an expected full year benefit of more than £300m. Implementation of these initiatives is in line with plan and the Company delivered more than £100m in H1 FY23, partially mitigating the H1-weighted headwinds resulting from inflation, returns normalisation and cost deleverage to result in a £69.4m adjusted EBIT loss. These headwinds drove notable adversity in 'other costs' (+260bps YoY as a percentage of sales) and warehouse costs (+210bps YoY as a percentage of sales, which also reflects inefficiencies resulting from the high stock position at the start of the year).

The Company remains on track to deliver Driving Change agenda benefits in excess of £300m in FY23. Of the c.£200m of benefits guided for H2 FY23, more than 95% result from initiatives already implemented in the first half of the year. Against a backdrop of abating headwinds, this underpins expectations of a return to profitability and cash generation in H2 FY23.

As expected at the P1 FY23 trading update, c.60% of the more than £100m of benefits delivered in H1 FY23 related to profit optimisation initiatives while c.40% reflected cost mitigation.

Profit optimisation

As with stock profile, ASOS has taken action in three phases to improve customer profitability:

1.   Brand level: The first phase of action, centred around unprofitable brands, was undertaken in October 2022. ASOS constantly reviews its brand portfolio to offer consumers the most exciting and inspiring curated edit of product. From October, a comprehensive review of brand profitability was undertaken. Brands can become unprofitable for a number of reasons including heightened promotional activity or returns, which is often correlated with, but not entirely dependent on product relevance.  Where unprofitable partners are categorised as 'strategic' brands, remedial action was taken including reduced discounting with a view to improving their contribution. Those deemed not to be strategic have been removed from the platform in some or all geographies depending on local performance. As flagged at P1 FY23 results, ASOS identified 35 unprofitable brands for removal, and has ceased buying from these brands.

2.   Country level: From November 2022, ASOS undertook a comprehensive review of country profitability, segmenting countries according to both their profit contribution and, in cases where profitability was not being maximised, the reasons behind this. A differentiated approach has been taken to remedy the issues facing countries in each segment. For example, free standard delivery was removed in five non-core European countries, delivery charges and thresholds were introduced or increased in a number of RoW markets and delivery prices were adjusted across the US. We have seen significant improvements in the underlying profit contribution from all our key territories during the period.

3.   Customer level: The third, more targeted phase of action is at the customer level. ASOS has built a base of c.25m highly engaged, young, fashion-loving customers. However, there are a small number of customers that have a disproportionately negative impact on ASOS profitability (over £100m). This group, which in FY22 accounted for 6% of active customers, generated a loss of c.£6 per order due to a heavy reliance on discounted product and high return rate, and ordered significantly more frequently than average. This behaviour may be temporary, part of the lifetime journey of a profitable customer or simply bad business for ASOS. ASOS is now undertaking more refined action, using a more personalised approach to incentivise positive behaviours.

The decisive action taken to improve profitability at speed using brand and country level measures has, as expected, adversely impacted sales and customer numbers in some cases. Active customers declined by 0.6m YoY to 24.9m¹ as ASOS churned some of the increase seen during the pandemic and a more disciplined approach to marketing investment saw new customer acquisition fall in a weaker consumer environment. The Company also saw a 7% YoY decline in Premier customers as subscription prices increased and minimum order values were introduced, or increased, in many territories. However, the average customer value² of both active and Premier customers has increased over the period, and ASOS' share of its UK customers' wallet has also increased by 50bps YoY³.

Cost mitigation

ASOS' operational excellence initiatives have impacted cost lines throughout the P&L. The most significant grouping of cost savings relate to supply chain (c.£27m), including the cessation of UK split orders being partially shipped from the Lichfield facility which, (in contrast to Barnsley) is not fully automated. Other significant categories include savings in overheads (c.£12m) and marketing (c.£6m). The Company reduced its investment in customer acquisition as it prioritised optimisation of existing customer profitability at a time of low growth, with marketing spend declining 8% YoY (flat YoY at 6% of sales). Within this, spend was curtailed in periods and geographies where consumer demand was weak and redeployed where it was more likely to generate value. These decisions are reflected in customer numbers as well as contributing to the variation in revenue by segment.

iii.         Robust, flexible balance sheet

ASOS ended H1 FY23 with cash and undrawn facilities totalling £408.6m at what is typically the seasonal trough in its net working capital cycle. In May 2023 the Company agreed an amendment and extension of its RCF to November 2024. The amended facility replaces the current £350m existing RCF and steps down over the term to £220m by August 2024. The RCF extension secures the Company's funding beyond FY24, supporting the business as it continues to execute on its Driving Change agenda and return to profitability and cash generation. The financing is subject to liquidity, leverage and interest cover covenants.

¹ Active customers declined by 0.6m YoY to 24.9m excluding Russian active customers (down 1.8m YoY at 24.9m including Russian active customers).

² Average customer value calculated as gross billed revenue over last 12 months divided by active or Premier customers respectively.

³ Kantar | ASOS Shoppers | Online | Spend % I 24 w/e 5^th March 2023 vs LY.

The free cash outflow of £262.7m reflects the reported loss incurred in the period, the phasing of stock receipts and payments, with the cash benefit associated with the lower H1 intake expected in H2 FY23 and capex. Due to historical commitments, FY23 capex is more heavily weighted to the first half of the year, with £115.0m invested in support of technology investments into data services, data science, merchandising, warehouse, web and payments platforms, as well as contractual payments relating to the deferred Lichfield and Atlanta automation projects. The Company maintains its guidance for full-year capex of £175m to £200m. Net debt closed the half at £431.7m (H1 FY22: £62.6m).

iv.        Reinforced leadership team and refreshed culture

The final pillar of the Driving Change agenda relates to simplification of ASOS' decision-making processes, developing a culture of innovation across the business, and reinforcing the senior leadership team with strategic key hires. This process is approaching completion. The wider, flatter structure that this represents acts to bring management closer to the organisation and facilitate quicker decision-making, breaking down silos.

ASOS is pleased to announce the appointment of Dan Elton as Senior Customer Director and Michelle Wilson as Senior Director of Strategy and Corporate Development. Supplementing the internal appointments to the management committee and previously announced external appointments, Dan and Michelle bring a wealth of relevant marketing, finance and capital markets experience to the ASOS leadership. The appointment of Sean Glithero as Interim CFO, replacing Katy Mecklenburgh who leaves the business following this results announcement, was also separately announced following the P1 FY23 trading update. Sean is an experienced CFO with a track record of delivery across a range of digital and fashion businesses, and will remain with ASOS until such time as a permanent CFO is appointed, having joined the business in February to ensure a thorough handover period. ASOS would like to thank Katy for her significant contribution during her time at ASOS.

On 6 April 2023, ASOS announced that it had further strengthened its Board with the appointment of Natasja Laheij and Jose Manuel Martínez Gutiérrez as Independent Non-Executive Directors joining the Board on 11 April 2023. Natasja and Jose Manuel have extensive experience in international commercial and financial management, e-commerce, and in the retail and fashion industry respectively. The Company also announced on 6 April 2023, that Patrick Kennedy stepped down from the Board with effect from 5 April 2023. The Board would like to thank Patrick for the important contribution he has made to ASOS. Mai Fyfield, who joined the Board in November 2019, has succeeded Patrick as Senior Independent Director of the Company.

Against a challenging backdrop, ASOS has achieved a great deal in this period of reset and is well positioned to return to profitability in H2 FY23 and beyond. While there remains much to be delivered in the next few months, I am confident that the ASOS will exit the year a more resilient and sustainably profitable business.

José Antonio Ramos Calamonte                                            

Chief Executive Officer                          

Financial review

All revenue growth figures are stated at constant currency throughout this document unless otherwise indicated.

Overview

Total sales declined by 7%⁶ (and (8%) on a reported basis), with challenging trading conditions affecting sales performance in P1 FY23 (September to December) continuing into P2 FY23 (January and February). In addition to widespread cost of living concerns and their impact on discretionary spend, consumers have returned to stores post-pandemic causing online penetration to step back in the short-term (albeit remaining notably higher on a three-year view). Sales declined further in P2 FY23 in part due to deliberate actions taken by the Company reflecting the prioritisation of structural profitability improvements and cash generation over top line growth. These actions included a reduction of Spring/Summer '23 intake (resulting in reduced assortment width), country-specific changes to pricing and delivery proposition, reduced investment in markdown and optimisation of marketing spend. Driving Change initiatives accounted for broadly half of the sales decline since December but have driven strengthening order economics and an improving adjusted gross margin as demonstrated by a recent run rate up more than 300bps YoY continuing beyond the period end into March and April.

These deliberate profitability actions also contributed to a 2% YoY decline in active customers⁷. Premier customers declined by 7% YoY, reflecting increases to subscription prices and the introduction of, or the increase in, minimum order thresholds for free delivery in some geographies. However, the average customer value⁸ of both active and Premier customers has increased over the period. In the UK, ASOS has increased its share of its customers' wallet by 50bps YoY⁹ and taken share in online retail among the target 16 to 35 demographic¹⁰. Average basket value ('ABV') increased by 5%¹¹, a positive outcome from the planned profitability initiatives supported by average selling price increases ('ASP'). Order frequency remained firm, down 1% YoY against a backdrop of steeper declines in visits, orders and conversion.

¹ Defined as having shopped in the last 12 months as at 28 February.

² Average basket value is defined as net retail sales divided by shipped orders.

³ Average basket value CCY is calculated as constant currency net retail sales / shipped orders.

⁴ Calculated as last 12 months' total shipped orders divided by active customers.

⁵ Calculated as total shipped orders divided by total visits.

⁶ Total sales CCY excluding Russia declined by 7% (down 10% CCY including Russia); total reported sales excluding Russia declined by 5% (down 8% on a reported basis including Russia).

7 Active customers declined by 0.6m YoY to 24.9m excluding Russian active customers (down 1.8m YoY at 24.9m including Russian active customers).

8 Average customer value calculated as gross billed revenue over last 12 months divided by active or Premier customers respectively.

9 Kantar | ASOS Shoppers | Online | Spend % I 24 w/e 5th March 2023 vs LY.

¹⁰ Kantar Total Market | Total Clothing, Footwear and Accessories | Top Retailers | Total , Online | 24 w/e 5th March 2023 vs LY.

¹¹ Group ABV CCY increased by 5% excluding Russia and increased by 4% CCY including Russia.

Performance by market

UK

Sales in the UK declined by 10% against a backdrop of weak consumer sentiment and a challenging online retail environment. However UK sales remain c.35% above pre-pandemic levels (c.10% CAGR since February 2020). Trading was volatile from month to month, with notable weakness in September (negative news flow relating to the cost of living) and December (postal strikes).

UK performance was also affected by planned profitability actions, including more targeted marketing spend, a change in markdown approach and changes to the Premier proposition. As ASOS prioritised order profitability ahead of growth, marketing spend was curtailed in periods of softer demand caused by both weak consumer sentiment and by challenges in the delivery market around Christmas and New Year. Markdown spend was deliberately weighted towards the peak period to accelerate the sell through of aged stock and facilitate the movement towards the renewed commercial model. With an increased focus on full-price sales, markdown was substantially reduced YoY in January and February, resulting in markdown spend back on the year. Premier subscription prices were increased from £9.95 to £11.95 in November 2022 and minimum order threshold for free delivery were increased in January 2023 from £10 to £15. However, ASOS continued to grow its share of the UK online retail market amongst its core 16 to 35 year-old demographic and increased its share of UK customers' wallet in the period ^1,2.

As a result of the factors outlined above, ABV increased 4%, underpinned by a higher ASP (supported by pricing increases and lower markdown). Visits (-8%), conversion (-30bps), orders (-14%) and Active Customers (-2%) all fell, reflective of ASOS' focus on sustainable, profitable growth.

EU

Constant currency sales in the EU were flat in the period, which was encouraging in the context of the wider macroeconomic backdrop and profitability measures taken in the region. EU sales remain 17% above pre-pandemic levels (c.6% CAGR since February 2020). As in the UK, markdown was reduced significantly in January and February with an adverse impact on sales in these months. Country-specific changes to delivery propositions and order thresholds were also implemented across the region.

Active customers grew 1% YoY, despite new customer acquisition being impacted by lower performance marketing spend and reduced promotional activity in certain EU territories. Encouragingly, Premier customers have grown strongly, up 13% YoY. Whilst visits were flat, orders and conversion were down 5% and 10bps respectively. However, the region saw strong growth in ASP and consequently growth in ABV. The Netherlands, Ireland and Southern Europe outperformed, offset by a weaker performance in Northern Europe.

¹ Kantar Total Market | Total Clothing, Footwear and Accessories | 16-35 year olds | Market Shares | 24 w/e 5th March 2023 vs LY.

² Kantar ASOS Shoppers | Online | Spend % I 24 w/e 5^th March 2023 vs LY.

³ ABV (CCY) is calculated as constant currency net retail sales / shipped orders.

US

US sales fell by 7% in the period at constant currency, against a backdrop of weak consumer sentiment and planned profitability initiatives. US sales remain 28% above pre-pandemic levels (c.9% CAGR since February 2020).

As reported in October 2022, return on investment in the US market in recent years has been particularly disappointing. During the period, ASOS reallocated capital away from the market, including reducing marketing spend and took action to improve the profitability of US orders including the removal of unprofitable brands and changes to the delivery proposition. While this resulted in a fall in visits (-1%), conversion (-20bps), orders (-12%) and active customers (-9%), with ABV +6% in constant currency (supported by price increases and reduced markdown), the profitability of the market was substantially improved.

As indicated at P1 FY23, ASOS' wholesale revenue in the US has slowed due to Topshop and Topman re-stocking in the prior year and reduced intake in reflection of the weaker consumer backdrop. Nordstrom remains a critical strategic partner for ASOS in the US and Topshop and Topman remain core brands in the Nordstrom portfolio. Sales of Topshop brands through the ASOS platform in the US were up over 50% in the period.

RoW

Sales in the RoW segment fell by 12%³ at constant currency and excluding Russia, having seen some of the most substantial changes under the country profitability review undertaken in P1 FY23 alongside a sharp reduction in marketing spend YoY. Delivery prices were increased across the segment alongside widespread changes to delivery thresholds. Visits, orders and conversion all stepped back, but ABV increased by 11% supported by pricing.

Active customers declined by 7% YoY. This is largely due to new customer acquisition remaining challenging, and a more competitive e-commerce market, in key territories. Premier customers have increased by 78% YoY, albeit from a low base.

On a territory basis, Saudi Arabia delivered double-digit sales growth and grew active customers, performing well throughout the half except during highly competitive key promotional events. Performance in Australia was challenging in the face of reduced investment in markdown.

¹ ABV (CCY) is calculated as constant currency net retail sales / shipped orders.

² Calculation of metrics, or movements in metrics, on an ex-Russia basis involves the removal of Russia from H1 FY22 performance. This adjustment allows YoY comparisons to be made on a like-for-like basis following the decision to suspend trade in Russia on 2 March 2022. The exception to this is visits, where ASOS have also excluded any visits from Russia in H1 FY23, in addition to H1 FY22.

³ RoW revenue CCY excluding Russia declined by 12% (down 36% CCY including Russia).

Gross margin

Adjusted gross margin¹ remained flat from P1 FY23 at 42.9% (-20bps YoY), demonstrating resilience in the face of headwinds, including input cost inflation. This was achieved primarily due to pricing on ASOS own-brands and improving freight rates (both from improved contract terms and reduced use of air freight).

Reported gross margin was back 700bps to 36.1%. This reflects the gross profit impact of the stock write-off (of £119.7m¹) announced alongside ASOS' FY22 results, facilitating the Company's transition to its new commercial model and the cost of sales element of the non-underlying sales tax charge of £4.9m².

Operating expenses

Total operating costs excluding adjusting items increased by 3% YoY and by 500bps as a percentage of sales, reflecting the impact of inflationary pressures, increased return rates and deleverage on fixed costs.

Distribution costs as a percentage of sales decreased by 30bps YoY to 12.5%, with the impact of cost saving measures under the Driving Change agenda more than offsetting increased fuel surcharges. In November 2021, ASOS began fulfilling "split orders" after the opening of the Lichfield fulfilment centre. Split orders involved parcels being shipped from both Lichfield and Barnsley to fulfil a single order, and whilst split orders benefitted the customer proposition by ensuring maximum stock availability, they also increased fulfilment costs. As part of the Driving Change agenda, split orders were discontinued in January 2023, with Barnsley now holding all SKUs available for sale at any point in time, reducing distribution costs. Other measures taken include bringing more of the sortation process in-house, reducing costs.

Warehouse costs as a percentage of sales have increased by 210bps YoY to 12.4% due to increased labour inflation across all fulfilment centres, in addition to inflation in consumables and utilities and return rates normalisation. The high levels of stock reported at FY22 results created inefficiencies in the first few months of the year, that  diminished as excess stock was cleared. Driving Change agenda initiatives designed to mitigate warehouse inflation include the winding down of ancillary storage, facilitated by the exceptional stock write-off, alongside simplification of UK returns infrastructure.

Marketing costs decreased by 8% YoY and remained flat at 6.0% of sales, despite increase in cost per click, as ASOS showed greater restraint on spending and focused on optimising investment to generate greater returns, in some cases reallocating spend between geographies based on underlying market conditions. Marketing investments were made ahead of peak trading in P1 FY23, but spend has since been scaled back, in-line with the Company's prioritisation of profitability over top-line growth.

Other operating costs as a percentage of sales increased by 260bps YoY (excluding adjusting items) due to the annualisation impact of headcount added in FY22 as well as wage inflation and contractual increases in third party technology services and overhead costs (including electricity, insurance, rates and waste management costs).

¹ Excluding the gross profit impact of the stock write-off £119.7m announced at FY22 and the non-underlying sales tax of £4.9m (see more detail in note 3 on pages 23-26). Total P&L impact of the stock write-off was £128.2m at H1 FY23 of which £119.7m related to gross profit, £7.8m warehousing costs and £0.7m depreciation costs. An additional c.£3.0m net P&L impact is expected to be booked in H2 FY23.

² Further detail in note 3 on pages 23-26.

³ As a percentage of adjusted revenue 

⁴ Further detail on adjusting items can be found on pages 23-26

Depreciation and amortisation costs as a percentage of sales increased by 60bps YoY (excluding Topshop brands amortisation). The increase in depreciation was driven by increased warehouse capitalisation costs (including relating to Lichfield fulfilment centre) and employee tech upgrades. The increase in amortisation relates to growth in intangible assets including data services, operations systems and web and payments platforms.

Interest

Net interest costs were £18.4m in the period, an increase of £7.0m YoY primarily resulting from the drawdown of £250m on the Revolving Credit Facility on 8^th September 2022.

Taxation

The reported effective tax rate ('ETR') is 25.0% based on the reported loss before tax of £290.9m. The H1 FY23 reported tax rate is different from the full year forecast rate of 21.1% due to a loss being incurred in H1 FY23, which is forecast to significantly reduce in H2 FY23. This loss creates a deferred tax asset, recognised at the higher rate of 25.0%, compared with the current year rate of 21.5%. This asset reduces in H2 FY23, and so the rate differential has a smaller impact on the overall ETR.

Going forward, ASOS expects the effective tax rate to be slightly higher than the prevailing rate of UK corporation tax due to permanently disallowable items and the higher tax rate paid in some of the non-UK based entities.

Earnings per share

Both basic and diluted loss per share were 218.7p (H1 FY22: basic and diluted loss per share of 13.5p). The decrease was driven by the reported loss before tax of £290.9m, down from a reported loss before tax of £15.8m last year. The potentially convertible shares related to both the convertible bond and ASOS' employee share schemes have been excluded from the calculation of diluted loss per share as they are anti-dilutive for the six months ended 28 February 2023.

Free Cash flow

There was a free cash outflow¹ for the half of £262.7m excluding the drawdown of £250.0m RCF on 8 September 2022, and ASOS ended the period with a net debt position of £431.7m. This was mainly driven by the reported EBITDA loss of £189.2m and capex investment weighted towards the first half.

The working capital outflow of £13.3m reflects the decrease of trade and other payables largely offset by the lower stock position versus FY22 as ASOS ended the period with stock of £978.4m (FY22: £1,078.4m, H1 FY22: £986.4m). This is resulting from the previously announced stock write-off² in line with the new commercial model and the phasing of stock receipts and payments, with the cash benefit associated with the lower H1 intake expected in H2 FY23.

Capital expenditure totalled £115.0m in support of technology investments into data services, operations systems and web and payments platforms, as well as contractual payments relating to the deferred Lichfield and Atlanta automation projects.

Katy Mecklenburgh

Interim Chief Financial Officer

¹ Definition of free cash outflow can be found on pages 45-46.

² Total stock impact on the balance sheet was £121.8m at H1 FY23.

CONSOLIDATED INCOME STATEMENT (unaudited)

for the six months to 28 February 2023

All activities are continuing.

The notes on pages 20 to 42 form part of this condensed consolidated financial information.