RE: Sinking ship25 Feb 2025 20:01
Outlook and guidance for ASOS
In FY25, the benefits of our new commercial model will become increasingly apparent. As such, we expect FY25 gross margin improvement of at least 300 bps to more than 46%, and adjusted EBITDA growth of at least 60% to £130m to £150m. While the TSTM JV is expected to have a £10m to £20m negative adjusted EBITDA impact in its first year of operation, it will be increasingly EBITDA accretive over time. We expect FY25 free cash flow to be broadly neutral, with capex of c.£130m and cash interest of c.£35m.
We will continue to focus on managing the inputs that will drive sustainably profitable revenue growth. Over H1 FY25, we expect a continuation of current revenue trends - strong performance of new intake offset by decline in sales of older stock from significantly lower stockholding, resulting in an overall sales decline. For FY25, we expect revenue to be within consensus range7. As a result of the significantly higher mix of full-price sales and the decisive actions taken to improve order economics, we are confident in achieving significant profit improvements in H1 FY25 and the full year regardless of revenue levels.
Our core focus remains sustainable, profitable growth. In the mid-term we continue to expect to generate adjusted EBITDA sustainably ahead of capex, interest, tax and leases, with revenue growth and an adjusted EBITDA margin of c.8%. Our new commercial model can drive materially higher gross margin towards c.50% through higher full-price sales mix and flexible stock models, which also benefit our inventory days. Our focus on efficient capital allocation will bring our capex down to 3% to 4% of sales, over time, we anticipate that our improving profitability and cash flow will also reduce our net debt and interest levels.
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