Once a major rival of online fashion retailing, ASOS is currently grappling with a significant sales slump. The company has warned that it expects its sales to continue to fall in the coming year, with a potential decrease of as much as 15%. This forecast comes on the heels of a near £300m annual loss, a figure that has sent shockwaves through the industry and caused the company's shares to plummet by almost 8%. This downturn has raised eyebrows and prompted questions about the factors contributing to this decline.
ASOS's financial woes are not an isolated incident but rather a reflection of broader challenges facing the fast fashion industry. The company's sales fell 10% to £3.5bn in the year leading up to September 2023, with profits slumping to £296.7m from £32m a year before. This is a stark contrast to the period between 2012 and 2022 when ASOS quadrupled its worldwide revenue, reaching over 3.9 billion British pounds.
So, what led to this dramatic shift? ASOS attributes its poor results to a challenging market backdrop characterized by "weak consumer sentiment" and higher inflation. The company's attempts to improve profitability and increase financing costs through its 'Driving Change' agenda also played a part in these figures.
However, according to retail expert, Jeanel Alvarado, there are other underlying factors at play here. "ASOS also faced stiff competition from fast fashion online specialist Shein and retailers with a combination of stores and online retail, such as H&M and Zara. The decline in fast fashion sales is not just about market dynamics and competition. It's also about changing consumer attitudes."
She continued, "Affordability has traditionally been a major factor driving consumers towards fast fashion. However, as more consumers become aware of the environmental and human costs of apparel production, fewer are opting for fast fashion. Instead, customers are opting for more sustainable fashion brands who also offer affordable items. Making it easier than ever for customers to support ethical and challenging the dominance of fast fashion."
Despite these challenges, Asos is not standing still. The company is actively working to clear old stock and is expected to return to profit by 2025. However, the road to recovery will be steep, with sales predicted to decline between 5% and 15% in the current fiscal year.
