Asos Sales Drop 14.9% in FY25, Stock Weighed Down by Profitability Concerns

Asos, the UK-based online fashion retailer, reported a 12% drop in annual sales for the year ending 31 August 2025, missing forecasts and drawing concerns from investors and analysts. The company's CEO, José Antonio Ramos Calamonte, reiterated that the firm is committed to reducing the number of promotional sales in an effort to improve profitability and attract a more loyal customer base. This decision comes as the firm continues to face stiff competition from fast fashion rivals like Shein and Next.

The company attributed the decline in sales in part to a strategy to reduce discounts and manage unprofitable shoppers who frequently return items. These measures, combined with a weaker consumer climate, have contributed to a challenging operating environment. Asos also announced a 1.5 percentage point reduction in return rates after implementing new return charges and banning high-volume returners earlier this year.

Annual pre-tax losses narrowed to £282 million, down from £379 million the previous year, with adjusted EBITDA at £131.6 million, below the company-compiled forecast of £138 million. Despite this, the CEO remains optimistic about the long-term strategy, stating that Asos is no longer just a shopping destination but a platform for fashion inspiration.

A Strategic Shift Toward AI and Personalization

Asos has launched an AI-powered styling service called "Styled for You," which curates outfit suggestions based on a customer's purchase history, preferences, and search behavior. The system is trained on a database of 100,000 curated outfits, aiming to provide more tailored recommendations to shoppers. For example, if a customer signs up for the loyalty program and buys a dress, the AI could suggest matching jackets, heels or casual accessories like sweaters and sneakers.

The company is also leveraging AI in its design process to speed up the development of new products by generating virtual looks on models or in different colors. This approach reflects a broader trend in the fashion industry, with competitors like Marks & Spencer using similar AI tools to enhance customer engagement and optimize product offerings.

Market and Financial Pressures

Asos reported a 14.9% decline in FY25 sales, significantly worse than the consensus estimate of an 8.7% drop. The company's stock fell nearly 2.5% following the earnings report, with shares down more than 40% year-to-date. Regional performance was weak across all markets, with UK gross merchandise value (GMV) down 7% and US GMV falling 18%.

While the company pointed to some positive developments—such as a 20% reduction in supply chain costs and an increase in UK new customers—the overall sales slump continues to raise concerns about its ability to compete in a fast-evolving retail landscape. Analysts have noted that the firm is "bracing for another year of sales decline" and is still far from regaining its 2022 sales peak.

Despite these headwinds, the company is doubling down on its strategy of reducing reliance on discounts and enhancing personalization. While this approach may be more sustainable in the long run, it has contributed to a near-term drop in sales. Asos now faces the challenge of proving that its transformation can deliver both a compelling customer experience and a profitable business model.