Asos Shares Tumble Despite Forecasting 60% Profit Jump in 2025

Shares in online fashion retailer Asos (LON: ASC) fell by 7% Tuesday despite the company forecasting a significant increase in profitability for 2025.

The decline comes after Asos reported an adjusted loss before tax of £126 million in its final results for the period ending September 1st, 2024.

However, Asos executives are confident that the company has turned a corner, having achieved key turnaround goals for the year. These included significantly reducing inventory levels by 50% and implementing a new “Test & React” commercial model that focuses on faster product design and delivery.

“We achieved our key priorities for the year,” said CEO José Antonio Ramos Calamonte. “Following the year end, we further strengthened our balance sheet with our Topshop Topman joint venture and our refinancing. Our product is now in the strongest position it has been in years, with the right level of newness to excite customers, and we have fundamentally improved our profitability through a relentless focus on operational efficiency.”

The new commercial model, which brings products from design to sale in less than three weeks, has already shown promise. In the last three months, sales of new products have increased by 24% year-on-year, with only a 6% increase in stock levels.

Looking ahead, Asos expects gross margin to increase by at least 300 basis points to over 46% in 2025, driven by a higher proportion of full-price sales. Adjusted EBITDA is also forecast to jump by at least 60% to between £130 million and £150 million.

Despite the positive outlook, investors seem to be focusing on the short-term financial performance.

The company's revenue declined by 18% year-on-year in 2024 to £2.905 billion, a consequence of the focus on selling through old stock at a discount. This headwind is expected to continue in the near term.

Calamonte said the measures the company has taken, while necessary, have “not made for attractive financial results over the last two years.”

However, he believes the actions were crucial for laying the groundwork for future growth. “We are confident we now have the right team, processes and business resilience on which to drive sustainable, profitable growth,” he stated.