Asos Slumps on Weak Earnings Outlook Amid Complex Overhaul

Core Viewpoint - Asos Plc's shares experienced a significant decline after the company warned that its full-year earnings would be at the lower end of expectations due to a complex turnaround plan [1][2]. Financial Performance - Asos expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between £130 million ($175 million) and £150 million, which is below the analyst consensus of £140 million [2]. - The company also indicated that sales would be lower than anticipated as it focuses on improving profitability [2]. Strategic Initiatives - The turnaround plan under CEO Jose Antonio Ramos Calamonte is taking longer than expected, primarily due to competition from Shein and a focus on cost reduction [3]. - Asos has closed its Atlanta distribution center and is now serving US customers from its Barnsley, England warehouse to cut costs [3]. - The retailer has been actively reducing unsold inventory, writing off an additional £100 million in November [4]. Market Challenges - Asos shares have dropped over 90% in the past four years as post-pandemic shopping habits shifted back to physical stores, compounded by rising living costs in the UK [5]. - The company has faced challenges with high customer return rates, leading to the closure of accounts for customers with excessive returns, which has resulted in backlash [5]. Industry Context - Competitor Boohoo Group Plc has faced similar challenges, reporting a record loss and considering the sale of its Pretty Little Thing brand [6]. - Boohoo is rebranding as Debenhams Group and shifting to a marketplace model, indicating broader industry struggles [6].