ASOS will begin its turnaround process by writing off £100 to £130mln worth of stock, according to reports today.
The online fashion retailer decided to take the hit after it posted a £9.8mln full-year operating loss in October.
Stock levels had risen to £1.1bn by the end of August, caused by a high level of customer returns and the cost-of-living crisis as well as slower lead and delivery times.
ASOS’ decision is part of new chief executive José Antonio Ramos Calamonte’s 12-month transformation plan, which was outlined in the group’s final year results.
Read more: ASOS has set itself an 'ambitious and necessary' transformation, but what is it?
Calamonte said he will focus on “renewing its commercial model and improving inventory management; simplifying and reducing its costs profile; ensuring a robust and flexible balance sheet; reinforcing the leadership team and refreshing the culture”
Stock management is a key part of this plan, although these are things a retailer like ASOS, valued at £536mln, should have already had under control according to Russ Mould, an investment director at AJ Bell.
Also key in the group's turnaround is improving its supply chain, which ASOS had conceded had become inefficient and weighing on margins.
Shorting buying cycles, reduced stock levels and new clearance channels are all methods ASOS will utilise to improve turnaround times.
Liberum, though, has also questioned the strategy, saying it “left us with many questions unanswered."
“The strategy appeared under baked and consequently, the management team sounded underprepared.”
“We are also not overly convinced it takes just 12 months to get your customer base off the discounting drug, especially in the current consumer environment.”