ASOS PLC (LSE:ASC) said it expects to report stronger profits in the first half of its financial year, helped by tighter cost controls and a shift back towards full-price sales.
In a brief trading update on Friday, the online fashion retailer flagged a “significant improvement in profitability” for the six months to the end of February, despite ongoing pressure on sales volumes.
ASOS pointed to stronger gross margins, driven by fewer markdowns and a higher proportion of full-price items sold. It also highlighted ongoing cost discipline, following a series of restructuring efforts aimed at stabilising the business after a turbulent period of falling demand and excess stock.
The company said it expects revenue to grow in line with market forecasts, while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) will come in ahead of expectations.
Currently, the City is predicting total sales growth of 13%, adjusted EBITDA of £34 million and an EBITDA margin of 2.6%.
A bright spot was a return to growth in full-price sales across its own-label ranges. ASOS said this rebound had been powered by its “Test & React” model, which allows it to trial small runs of new designs and quickly ramp up production if they prove popular.
The approach now accounts for more than 15% of own-brand sales and is continuing to grow, according to the company.
The strategy is central to ASOS’s bid to stay competitive in a crowded fast-fashion market, where trends can shift quickly and shoppers are increasingly drawn to platforms that offer fresh styles without heavy discounting.
The update comes as ASOS attempts to steady its operations following a challenging few years marked by leadership changes, inventory issues and falling profits.
In November, the group said it had made progress in cutting costs and improving cash flow, although sales volumes were still under pressure.
The online fashion retailer will publish its half-year results on 24 April.