ASOS Plc

So I don't need to get there. So good morning, everyone. Happy to see you again or to meet you, those of you that I don't know. And what a day to be in front of you, representing a digital retailer or a fashion company. We're living interesting times. Still, I'm really excited and really honored to be here in front of you representing ASOS today in my first set of results as a CEO. And the reason why I'm so excited is because I am a true believer that ASOS is a unique opportunity and we have a unique capacity to deliver value both to our consumers but also to our shareholders. A value that is built on our unique customer model, on our fashion credentials. But also a value that is built on our very dedicated and passionate team. And before starting, I would really like to take a second to thank them for the amazing effort they made for the last 12 months. And I think it's worth recognition. So... I think this is a great business, but there is a lot to do. And as we said in the RNS this morning, there's a lot to change. So today we're going to be trying to unpack a little bit what is it that we mean with this change. Let me first start by introducing Katie, our interim CFO, and she's going to be the person that is going to walk us through our results on fiscal year 22. And then after that, I'm going to be giving you a little bit more detail on this plan for change and why and how do we want to do it. So let's start, if I may. So, okay. Since I became CEO four months ago, so it's been a very long week of four months, I've spent a lot of time talking to people, talking to suppliers, talking to investors, talking to customers, and also talking to ASOSers, to our colleagues, to try to understand better the strengths of ASOS, but also our challenges. And in all these conversations, there has been a very clear red thread. And the red thread is everybody thinks... This is an amazing business and it has a great future. But also everybody thinks there is a lot to change if we really want to unlock this value. That is even clearer when you analyze the performance of ASOS in the last years, and especially in the last 12 months. And let me get a little bit into that and give you a little bit of the key messages that we would like to share with you today. First, it's very reassuring to see that the UK is still our core business. It's our fortress. So we see a very strong performance in the UK, and Katie will elaborate more on that later, so I don't want to take a lot of time here. And it's also very reassuring when we look into some of our brands, like Topshop, to see the performance of Topshop, and to see that, for instance, we more than double sales, which is even more, even overcompensating our expectations when we acquired the brand back in February 2021. But there are also very clear issues in our performance that I want to be very honest and transparent and share with you. The first one is, if you want, the unsatisfactory performance of our international business. It's quite clear that we're not happy with the performance, and I will elaborate more on all of them later. The second one is the reliance of our marketing and commercial model on markdowns. we could say unhealthy reliance or whatever, but certainly a certain level of reliance. The third one is that our operation model is not as efficient as flexible as we would need to really support a global operation. And I think it's something I will also elaborate a little bit more later. The fourth one is the lack of sufficient leverage on our data and our digital native capabilities. And last but not least, that we need to refresh our team and our culture. So these are a lot of issues, actually. And that's why what we're bringing here today is a very clear plan to tackle those issues. A plan that will be unpacked in two levels. One in the very short term for the first 12 months to make sure that we simplify our operation and we work and we make it more flexible and more resilient. And that we will build on four blocks. The acceleration of our commercial model. A very ambitious cost and profit boosting program to offset the cost headwinds that we're seeing. The third one is to make sure that we have the financial flexibility to implement all those changes. And last but not least, refreshing our leadership team and our culture, as I mentioned before. But also we're launching in parallel a comprehensive review of our end-to-end operations and how do we allocate capital across the different geographies. I'm going to elaborate more on that later, so don't you worry. These are very ambitious changes, as you see, as you can imagine, and I would like to highlight two very critical things that we are announcing in this RNS that are supporting those changes. The first thing is that we have proactively secured an agreement with our lenders to make sure that we have the financial flexibility. And Katie is going to give you much more color on that. And the second one is that we're also getting a lot of flexibility with the management of our stock that will come with very interesting and additional flexibility and cost impacts. So, as you see, a lot to change. I'm pretty sure that there will be many questions at the end, so I'm going to try to go fast. And I would say let's start first having a look at Fiscal Year 2022. So I'm going to hand over to Katie.

Thank you, Stephen.

Good morning, everyone. I'll start by taking you through the headline results for FY22. Before I start, I'd like to clarify that all revenue growth numbers are stated in constant currency and we have excluded Russia from FY21 H2 to ensure a like-for-like comparison. Total sales grew by 4% as inflationary pressures increased in the second half, impacting customers' discretionary income. Gross margin declined by 180 bps to 43.6% in line with the guidance we gave for the year of down 150 to 200 bps. Adjusted EBIT margins stepped back by 420 BIPs to 1.1%, with an adjusted PBT of 22 million and corresponding adjusted PBT margin of 0.6%. Cash capex closed at 183 million, a saving of 27 million versus guidance as we deferred some spend into FY23. And lastly, we closed the year in a net debt position of 153 million. Before I take you through the results in a bit more detail, I'd like to quickly call out some of the key operational highlights that we've achieved in FY22. Topshop performed strongly, delivering revenue growth of 105% year-on-year and contributing to gross margin expansion. At a group level, Topshop jeans are now the leading women's wear jeans brand on-site. We also recently launched the next chapter for Topshop and Topman on the 29th of September. This new collection is the first season that's conceived and created entirely under ASOS's ownership. We successfully launched Partner Fulfills in the UK with Adidas and Reebok last November. Subsequently, we have expanded into Germany, France, Spain and Italy and have several new brand launches planned for the upcoming months. This is key to gaining flexibility and enabling us to offer a more locally curated collection of brands without the corresponding inventory impact. We have seen 12% growth in our global Premier customer base, with Premier customers shopping three and a half times more than an average ASOS customer. Our Premier offer is key to driving loyalty and engagement amongst our customer base, as well as increasing our average customer value over time. We have continued to collaborate with our brand partners on new collections. Recent examples of this include our partnership with Netflix to launch Reclaim Vintage and Stranger Things. This was a sellout with 10,000 units sold and it resonated strongly with our younger female demographic. Within Sportswear, we collaborated with Nike to create a campaign that highlighted the best of Nike footwear, styled with a curated edit of ASOS design, Topshop and Collusion clothing. This leveraged our in-house creative and studio functions as well as the ASOS media group and led to an uplift in Nike campaign lines by 124% in the first week. And lastly, within the U.S., we launched a range of ASOS Design, ASOS Lux, and ASOS Curve dresses exclusively for the U.S. customer, and have now launched U.S. Design in 14 stores in the U.S., with an expanded collection available at Nordstrom.com. Looking at our operational KPIs, we've seen a growth in visits of 1%, which is a lower growth rate than in FY21. The key driver of this decrease is the boredom browsing seen during the COVID lockdowns, driving high visits in the base period. The upside of this is that we saw a corresponding increase in conversion rate of 20 bps, reflecting an uptick in the percentage of engaged shoppers. Firstly, a reminder that we disclose ABV net of returns. ABV declined by 3% year-on-year, driven by the step-up in returns rate. The returns impact was partially offset by price increases and the higher mix of occasion wear, driving increased ASP. As the premier customer base grows, we see ABV decline whilst frequency steps up. Therefore, we look at ABV in conjunction with average order frequency, which at plus 5% more than offset the decline in ABV. And lastly, we saw a 2% growth in active customers as customer acquisition slowed year on year. Jose will talk to this in a bit more detail later on. Turning now to our segmental performance. The UK grew by 7% for the full year despite a marked change in customer behaviour from April due to accelerating inflationary pressure as referenced at P3. This growth was underpinned by strong KPI performance. We saw a shift in demand into occasionware, supporting ASP growth, along with a 5% growth in active customers, 5% growth in average order frequency, and 6% growth in premier customers. Revenue grew by 2% in Europe. We saw a decline in France year-on-year as demand shifted back to online channels and a slowdown in growth in Germany as customers were exposed to the cost of living pressures. From a KPI perspective, we saw 2% growth in average order frequency, 5% growth in active customers, and a pleasing premier customer growth of 33%. ABV stepped back by 4%, driven primarily by the step-up in return rates. The U.S. grew by 10% year-on-year, supported by wholesale expansion, top-shop growth, and a more locally relevant offer. Visits fell by 8%, but we saw a 20 bps improvement in conversion. ABV grew by 4% as demand shifted into dresses and higher ASP categories. Average order frequency remained flat year on year, and customer acquisition slowed in the US as we paused our broad-breaching marketing campaign in the second half. However, pleasingly, we grew our premier customer base by 19%. Within the rest of the world, we saw a decline of 9%. The first half continued to be impacted by the continued delivery disruptions. However, we saw this ease in the second half with a return to standard delivery propositions and the resumption of Premier in Australia. We saw most KPIs step back with declines in visits, ABV and active customers. However, we saw a step up in average audit frequency and 208% growth in Premier customers. Gross margin declined by 180 bps to 43.6%. This was primarily driven by increased markdown and elevated freight costs. The increase in markdown was primarily concentrated in H1 as we cleared through the late arriving spring-summer stock. We did, however, see an improvement year-on-year in H2 as we cycled a period of elevated markdown in the prior year. Turning to freight, we saw an impact of 180 bps year-on-year driven by higher rates in the market and an increased use of air freight to circumvent supply chain disruption over peak in FY22. The year-on-year impact improved slightly in the second half as we benefited from both a higher mix of air freight and improved contracted freight rates. These increases were partially offset by mid-single-digit price increases taken across ASOS brands, as well as improvements in buying margin and the growth of Topshop, which has a higher retail margin. Turning to operating costs. Distribution costs increased by 30 bps year-on-year, of which 100 bps was driven by the impact of the COVID-related returns benefit unwinding. Along with the increase in split orders as we brought Litchfield online, this had a cost drag but provided a stronger experience to the customer who was able to access a greater selection of products. This was partially offset by supply negotiations and the flexible carrier strategy, allowing us to dynamically allocate volume to the cheapest carrier. Warehouse costs increased by 170 bps, of which 80 bps was driven by the impact of the COVID-related returns benefit unwinding, along with an increase in labour costs and the launch of Litchfield as a manual facility, which was a cost drag. The elevated inventory levels also resulted in inefficiencies in our warehouses. Marketing costs increased by 60 bps as we launched our test and learn approach to broad breach marketing. We decided to pull back on this in the second half given the unfolding macroeconomic backdrop. However, we have incorporated learnings from the initial advertising campaign into the development of a new advert which was launched towards the end of September. Operating costs, excluding depreciation, were 10 bps higher year on year as we worked hard to offset inflationary pressures through our Operational Excellence Programme. In total, across the P&L, we delivered 120 of operational efficiencies to largely mitigate inflationary pressures. Other operating income was 20.6 million for the year. This includes 1.2 of income received following the decision during the year to sublet part of ASIL's site at Leavesden, and a 19.3 gain from closing out the ruble hedges, which were no longer required following the decision to spend trade in Russia on 2 March. This gain was, however, more than offset by additional costs, including those incurred to clear through the resulting excess stock and fulfilment centre inefficiencies. There was a 350 million cash outflow in FY22, primarily driven by a substantial working capital outflow associated with an increase in stock. This increase was driven by several factors. A marked slowdown in demand, driven by global economic uncertainty in the second half. The timing impact of FY21 stock that was received in FY22 as a result of shipping delays. the earlier receipt peak stock for FY23, and finally the impact of increased returns in the second half of the year. Capital expenditure totalled £183 million, of which we spent £123 million on technology investments in support of the development of marketplace integration required for partner fulfills. continued optimization of customer experience, and investments in support of ASOS's progress against its data strategy. We also spent $60 million on supply chain in support of the automation programs in Litchfield and Atlanta. I'll now hand it back to Jose.