Asos Share Price Rallied 6.02% on Upbeat Half-Year 2024 Results

The ASOS plc (LON: ASC) share price rallied 6.02% after the company released its latest trading update for the 26 weeks (half-year) ending 3 March 2024. In the latest semi-annual financial overview, the company has observed a decrease in sales by approximately 18%, aligning closely with the forecasts. 

This trend continuation from the fourth quarter of fiscal year 2023 into the first half of fiscal year 2024 is attributed to strategic measures implemented throughout the previous year to enhance fundamental profitability within the framework of the “Driving Change” initiative.

Additionally, the intake during the first half experienced a nearly 30% year-over-year reduction, a deliberate move to recalibrate inventory levels.

The company has made noteworthy advancements in executing the “Back to Fashion” strategy, which includes initiatives to eliminate outdated inventory and transition towards a new operational framework by the fiscal year 2025.

The company is ahead of schedule in amplifying stock efficiency and diminishing inventory levels to approximately £600 million by the end of this year. A significant element of this strategy, the “Test & React” mechanism, now accounts for roughly 5% of the sales from the company's brands. 

This process efficiently brings high-fashion items from conception to the marketplace within two to three weeks, substantially enhancing the company's adaptability to meet consumers' dynamic demands.

Furthermore, there has been a notable improvement in free cash flow, increasing by approximately £240 million compared to the first half of the fiscal year 2023. This uplift is primarily due to the heightened underlying profitability and the successful clearance of aged inventory. 

Despite the downturn in sales, the first half saw a minimal free cash outflow of around £20 million, a significant achievement considering this period is typically marked by considerable adverse working capital movements. This represents the most favourable first-half cash performance since the fiscal year 2017.

Ending the half-year positively, the company reported a substantial cash balance exceeding £330 million, marking an improvement of over £20 million from the first half of the fiscal year 2023. The company's full-year financial outlook remains unchanged, projecting a 5-15% decrease in sales but anticipating a positive adjusted EBITDA.

The objectives include returning inventory levels to pre-COVID figures and achieving positive cash flow, thereby reducing net debt. This strategic approach underscores the company's resilience and adaptability in navigating the challenges while positioning itself for sustainable growth and profitability.

Asos share price. 

The Asos share price rallied 6.02% to trade at 368.3p from Monday’s closing price of 347.4p.