ASOS Plc

Okay, good morning everybody. Phil Clark here, look after investor relations here at ASOS. So just very quickly, housekeeping. We're going to start with the presentation, so I'll hand over to Jose in a minute. Him and Aaron will run through the presentation. We've got some great material in there. I'll then come back and I'll host the Q&A from here. We'll do questions in the room first, and then we'll do questions from the web platform.

Jose? Okay.

Well, I don't know why I do that because I have the other one. So morning, everyone. It's always very, very happy to see you here in our presentation of the first half of this financial year 26. And let me first tell you a little bit what is going to happen this morning, even though probably you already know. I will start giving you a little bit of the strategic highlights. Then I will cover the really important thing, that is the numbers. And then I will go back to give you a little bit of the strategic outlook. for the rest of the year and then we will move to Q&A that I know that this is what everybody wants. You know I tend to talk a lot so please don't let me talk too much so that we can really have enough time for Q&A not like in other occasions. I really do my best but please keep me honest I think you say in English. So with this spirit let me try to start by giving you the most important messages in one page so that with that you can probably forget about the rest of the presentation. And if I want to summarize everything into one liner is like we are delivering to our promises. That would be the one liner. Why do I say that? Well, we started three years ago a big transformation and what we see is that this is happening and now we're building on solid pillars and obviously I'll give you more about that. We told you at the beginning of this this financial year that we were going to focus on growth and what we see is that the early signs are positive and we feel confident about the rest of the year because we have a clear and a detailed plan that is going to take us to where we want. So if you want, in a nutshell, we are happy that we see we are delivering. So let me get there step by step. And to go there, I'm going to do something that I normally like to do, and probably you guys don't like that I do, but I'm gonna do it anyway. That is, I want to go back to which one is our ambition. What is it that we're trying to get here in ASOS? And three years ago, we really, I mean, not decided, but we really stated that what we wanted to be was the best global destination for young fashion lovers. What does it mean? You have heard that 100 times, but I like to repeat it because it helps. It means we bring to consumers the most relevant products. The most relevant product means fashion first, discovery of brands, and this is based on structurally faster way of delivering products, putting together an assortment that is more relevant of our own brands and the best brands in the planet perfectly blended, which is quite unique. The second thing that makes ASOS different is We want to deliver to our customers the most inspirational shopping experience. That is a shopping experience that is immersive, outfit first, is personalized and is social. And all this is underpinned by the most efficient operational model. A model that is flexible, that adapts. I'm sure you're gonna be worried and you're gonna ask about the Middle East crisis and how this is impacting the businesses. The fact that we have been working on having a more flexible and more dynamic model is helping us to adapt to, for instance, these type of circumstances. So what makes ASOS different or our ambition was to make ASOS different by putting together these three big pillars and delivering on the three big pillars. And this is quite an ambition because it's not that easy to do that as you will appreciate. So we were aware three years ago that we were getting on a journey from where we were to become this preferred global fashion destination for young fashion lovers. And that journey has certain steps. We could not jump from where we were to that in one go. So first, we really needed to address our legacy issues that you know were our debt and our stock levels. And I feel comfortable we've done it. Second, we needed to transform our commercial model. We needed to go from a commercial model that was not generating, it was not giving us sustainable growth, profitable growth. So we wanted to move to a commercial model that would give us sustainable growth, and that was a big transformation from a model that was based on a lot of stock, a lot of promotion, and a lot of performance marketing, into a model based on newness, excitement, full price sales, and we feel we are in the right place, and I'll show you why. And then the third step of that journey is re-engaging with our consumers, focusing towards growth. We have started this year, and as I said before, the early signs are very positive. Let me elaborate a little bit on the first two steps. Three years ago, we told you we wanted to gain much more flexibility with our balance sheet. We want to radically improve our gross margin. And please pay attention to the word radically. We came and said we wanted to take in the midterm our gross margin to 50%. And some people thought, this guy is crazy. Maybe they were right. We wanted to implement rigor in our cost management and discipline in our stock flexibilities. In stock management, sorry. What we have seen over the course of the first half of this year is that our gross margin has improved 330 basic points. Our profit per order, 30%, our adjusted EBITDA, 51%, and our stock has been reduced by 10%. So we are delivering on those targets. But let me take a little bit of a historical perspective here. Our profit per order in the last year has improved 560 basic points. our, sorry, our gross margin has improved 560 basic points. Our profit per order has improved 70%. Our EBITDA has improved 14 times, which is quite a number. And our stock has been reduced more than 60%. When I say we are building now on solid pillars, this is what I mean. This is a radical transformation of the underlying business of ASOS. And we feel we have delivered. That's why we feel this these first two steps are in the right place because now the business of ASOS is solid. Now we can build on it. And this is why we said at the beginning of this fiscal year, it's time to focus on growth. And the way we are focusing on growth is by focusing on specific areas of growth. So we are focused on growth, and growth comes through focus. You want to say a little bit of plain words. And we have focused on two things. Number one is we have focused on the core parts of our business that are women's wear, and the UK. And the second thing we have done is that we have focused on rebuilding our customer base, starting for new consumers. Let me give you a little bit of more color on these two things. What is it that we have done to focus on the UK? Well, a lot of the initiatives we have done have had a UK focus. Sorry, it will be focus. I cannot find a better word in English. Best and React goes women's first. We focus more on top shop than on top man. The new partner brands that we have brought are more on the women's wear side. When we started AFS, we have focused more on stronger women's wear brands. The exclusive collabs we have done, Adidas, is only women's wear so far. We have done changes in marketing. The heart, we'll talk about that later, is mainly focused on women's wear. We have put a lot of energy in women's wear, and rightly so, because it's the core of our business. The outcome is, in the first half of the year, women's wear performed with a minus two year on year, improving 10 points versus the end of last fiscal year. In the month of March, so in the beginning of Q3, Women's Wear is on growth. So it's clearly having an impact on the performance of Women's Wear. If we go to the UK, well, we have focused our marketing efforts in the UK. We have increased the budget more in the UK. Our own campaigns have taken place in the UK. We have launched our loyalty program first in the UK. We have launched our exchanges and our returns policy first in the UK. The UK has received more focus on other geographies. The impact, H1 UK performed four points better than the rest of the company. During the beginning of Q3, the UK is also still ahead of the company and is better than where it was at the end of this. So it is working. This focus is working in delivering results. Obviously, our opportunity is to take all these learnings into the rest of the business, into other geographies, into other segments. And obviously, we are going to do it. The second big focus of these six months have been rebuilding our customer base. This is the evolution of our total customer base during that journey that I took you before briefly. Obviously, during the first two parts of the journey, the customer base was being damaged. We were reducing stock. We were reducing promotion. We were reducing performance marketing. We were doing a lot of things that were not necessarily pushing the customer base, and we knew it. We were expecting it. It's only now that we have gone into phase three when we see this customer base stabilizing. Because this is now when we feel we have the solid pillars to build on and really talk to these consumers. And this stabilization is going from two fronts. On one hand, our churn is improving. So it's green reuse or our rotation is improving, whatever you want to call it, because churn rotation is pretty much the same thing one way or another one. And it's been improving significantly during the last phase. More than six months, but certainly the last six months. And second, we are capturing more new consumers. New consumers was in growth over H1, over our top four markets. New consumers is in more growth over the beginning of Q3 in all of the group. So it continues accelerating. And remember, for us, it's very important to attract these new consumers because we have opportunities. we have implemented a big change in our commercial model. So we were expecting that we were going to change a certain part of our consumer base. The fact that new consumers are coming means they are connecting with our value proposition. They are happy with the product. They are happy with the shopping experience they want to buy with us. What is really behind all this? A lot of actions. And now get ready because I'm going to go one by one. No, no, don't you worry. So I promised I was gonna try to be brief, so I'm gonna concentrate in a few of them, but there are a lot of things happening in ASOS as always, and rightly so by the way, because this is, as you know, retail is retail, so it requires a lot of changes and small changes at the same time. Let me focus on some of the big changes. When we talk about the product, so remember we always go product, shopping experience, and operational model. When we're talking about the product, we have brought a lot of things that we have already started in the past, and you will have heard me talking about it for many times. But when we talk about our own brands, Test and React continues growing. It has grown double digit over H1. It's six points more participation in the sales of own brands. It's going in the right direction. Super happy with that. We have accelerated lead times by 30 days. We have relaunched our 4505, that is our own brand for sports. 20% growth year on year. Overall, the autumn-winter collection has improved the sell-through by five points, reaching the highest sell-through ever in ASOS. It is working. It is working. When we go to our partner brands, we have onboarded 60 new brands during H1. That takes us to a position where during the course of the last 18 months, we have renewed 20% of the brands, which is very relevant. With 50 of these brands, we have exclusive collabs or exclusive products, and I will talk a little bit about that now. We are pushing our flexible formulas. Flex fulfillment is already, sorry, both together are more than 20% of the sales of our third-party brands. More than 150 brands with partner fulfills. We have launched ASOS fulfillment services. It's working very well with Inditex. It's growing and on full price. So it is really working. It is really working. I just wanted to give you a little bit of color on one initiative. That is one of our call-ups. And probably you're aware that last week we launched drop three of our collab with Adidas. And that was a special moment because there were quite a few first moments during last week. It was the very first time that this collab was available for American consumers. It was the very first time that this collab was going into in real life. We took over. the store in Oxford Street. Actually it was quite interesting because you could see ASOS on both ends of Oxford Street. You could walk by John Lewis and see Topshop in the windows and then you could get to the store of Adidas and see all the windows taken over by the images of the call out which was very, very exciting. The result was really amazing. Sold out in three days. It's 80% sell-through, which is pretty much leftovers. The best sellers is north of 90% sell-through in three days, even though we have double the purchase. It's not only that we're selling the color. The sales of Adidas overall, the halo effect, pushed them 43% up year on year. Not because of the color. It's like the rest of the stuff. We sold 40% more than last year. And if we're talking about the U.S., that was the first time, as I said before, the U.S. almost doubled its participation in the sales of ASOS, and 50% of the customers that bought the collab were new customers. So these kind of initiatives have an impact on ourselves, have an impact on our partners, and attract new consumers. That is exactly what we're looking for. I think it's a very good and a very powerful tool that we're using. Our shopping experience, we have been investing a lot in our shopping experience. I just wanted to highlight three things. We have been investing more in marketing. We have increased our investment in marketing by 50 basic points. But at the same time, we have reduced the cost of the visits acquired, which means we're doing more with more efficiency. And we have launched The Heart, which is a specific initiative that I will explain to you briefly right now. We have expanded loyalty, it was in the UK, now it's already 60% of our customers in the UK, which is more than 3.5 million people. We launched it Germany and the US, where already 20% of our customers have joined the initiative. Remember, we don't give any economic incentive to join, so it's quite a number. And what we're seeing is that the customers that join loyalty grow with loyalty. Our top tiers grow 9 and 20% respectively versus the customers that don't join Logitech. It is having an impact and we will obviously push to roll it out even more and to grow it even more. And we have invested a lot in our shopping experience and I will also give you a little bit of detail about that right now. Let me tell you about the heart, not the best name, you can blame that on me. The heart is an initiative that we do every month where we pick the best of our brands, the best of our partner brands, and we put an emphasis on how we're going to communicate that to consumers and how we're buying it. That generates a very specific and structured plan that comes to market every month. So it's systematic. It's not improvisation. It's systematic. The outcome, the sales of these items, we call the rate of sale, which is the number of units we sell on average every week, has doubled versus the rest of the items so obviously it's working and we will continue doing it and roll it out to not only women's wear but men's wear when we're talking about the shopping experience what we have done first is that we have focused on our app in this case on our iOS app why on our app Because first we know that our app consumers have a value that is twice as big as the non-app consumers. So obviously the app was important. We put a lot of emphasis in growing the downloads of the app. What we have seen is that over the course of the last month, we have gone from a negative trend versus last year to growing more than 30% on app downloads year on year. It's clearly working. And it's not only that they are downloading more, they are using it more. But I'll get to that now. The second thing that is important to say in this step change in our shopping experience is that all the changes we have done have followed a systematic approach. It's not the outcome of a hunch of our intuition, it's the outcome of a system. This system is based on a drastic acceleration on the velocity of our tech development. During the course of H1, we have more than doubled the amount of tests we have put in the market. And at the same time, we have increased the heat ratio by 60 volts. This is supported by, as I said, an acceleration of the velocity and is supported by a radical increase on the quality of the measurement and the speed of the measurement of this experiment, this obviously. The outcome of that is we have implemented, not tested, implemented 50 new features in our app. I will not run you through the 50. I promise I will give you time for Q&A, but just let me highlight a few of them. Virtual try-on. Consumers can, in our iOS app now, take a picture of themselves or choose a model, choose an item they want and see how it looks on them. That you have seen some other players have also launched it. It is available in our app and it's working very well. Wasteless time. when a consumer wants to buy a specific item, we are proposing this consumer different ways to style this item. That increases the value of this item for this consumer because it has more usability. And you want, last but not least, out of the three that I am selecting here, is this trending section. This is a more immersive way to navigate our assortment and to fill it that is much more engaging. At the end, remember, what we're trying to do is to go for a more from a more transactional into a much more experiential way of money. The outcome is a completely reinvented shopping experience. We have gone from, if you want a more transactional app into a much more experiential app. We've seen that consumers like it. So the ratio of daily users over monthly users, which pretty much means like how many times the consumers are coming every month has increased 60 basic points. But even more important, the consumers that come are buying 9% more than before. So it is having the right impact. This is what we wanted. Last but not least, always important to talk about our efficiency and our operational model. And here we have also implemented a lot of improvements. Again, rigor in the costs. Our friends of supply chain have come with another 150 basic points of improvement. We have reduced the impact of returns by 160 basic points, increasing our profit per order overall by 30%, quite remarkable. We have improved our customer proposition, cut off next day delivery in the UK have gone from 10 to 11. We have introduced changes like exchanges. And last but not least, we have started to really use AI extensively in a lot of the things we do. Let me give you a little bit of color. During the last six months, really gone deep in AI on productivity. AI can be applied on many more other areas, and we will talk about that later, but during the last six months, we have gone deep on productivity. Let me illustrate how. November last year, we signed, or we extended, if you want, our strategic alliance with Microsoft. Obviously, if you want to go into AI, it's important to have a strong partner, and in our case, it's Microsoft. As a result of that, we have rolled out the use of Copilot from 10% of the organization to 90%. That's pretty much everyone. People have started to use it, have started to build agents. We have saved 35,000 hours. It's only the beginning, but it's quite a number. We have implemented a customer care agent, AI Power. The outcome of that is increase in customer satisfaction, increase in, let me call it, containment rates, reduce of cost per contact by 90%. Today, 15% of our software, 20% of our buying decisions are already executed or delivered or deployed, whatever, by AI agents. That gives you an idea with these three numbers of how we're going on AI on these topics. So if you want a little bit of a summary of that, We promised we were going to transform the business. I feel the business is now building on solid pillars. We promised we were going to focus on growth on H1. I see that the early signs are positive. Let me save the last point for later. Now I'm going to hand over to Aaron who will give you the really good stuff.