ASOS PLC (ASOMF) Full Year 2024 Earnings Call Highlights: Strategic Stock Reduction and ...

GuruFocus News
4 min read

In This Article:

  • Stock Reduction: Reduced stock from GBP1.1 billion to GBP520 million over two years.

  • Test & React Sales: Achieved 10% of sales from Test & React, aiming for 20% next year.

  • Gross Margin: Expected improvement of 300 basis points to over 46% in FY25.

  • EBITDA: FY24 adjusted EBITDA of GBP80 million; FY25 target of GBP130 million to GBP150 million.

  • Free Cash Flow: Positive GBP38 million in FY24; expected neutral in FY25.

  • Net Debt: Reduced by GBP22 million to GBP297 million at year-end.

  • Cost-to-Serve: Reduced variable cost as a percentage of sales by 90 basis points in FY24.

  • Return on Advertising Spend (ROAS): Increased by 18% in the last quarter of FY24.

  • Stock Turn: Improved by 30% year-on-year.

  • Old Stock Write-off: Final GBP100 million write-off completed in Q4 FY24.

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) 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.

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