Investing.com -- British online fashion retailer ASOS PLC (LON: ASOS ) shares dropped about 1% on Thursday as the fashion retailer reported first-half results that showed sales falling short of market expectations and a lower EBIT, despite EBITDA being ahead.
The company’s H1 sales reached £1.29bn, falling slightly behind the Bloomberg consensus of £1.32bn and representing an adjusted like-for-like decline of 13% compared to the same period last year.
The company’s adjusted EBITDA for the first half was £42.5mn, which was ahead of the Bloomberg consensus of approximately £36mn.
However, adjusted EBIT fell below expectations, contributing to the stock’s decline. ASOS has maintained its adjusted EBITDA guidance for FY25 but expects revenue growth to be at the lower end of the consensus range, between -2% and -9%.
Analysts at RBC commented on the competitive challenges ASOS faces, stating, "ASOS offers a customer-friendly proposition in our view; however, it operates in a highly competitive environment and its advantage on service has reduced in recent years according to our research. We believe this reflects a focus on protecting unit economics, which we expect to continue, in the light of a very competitive environment."
Jefferies analysts also weighed in, noting the improvement in ASOS’ EBITDA margin to approximately 3% as a positive development but flagged concerns over lost revenue, reliance on prior stock write-offs, and continued pre-tax losses of 5%.
ASOS is guiding for an adjusted EBITDA of between £130mn and £150mn for FY25, with a gross margin improvement of at least 300 basis points.
The company also expects free cash flow to be broadly neutral and has reiterated its medium-term targets, including an adjusted EBITDA margin of around 8%, a gross margin towards approximately 50%, and capital expenditure between 3% and 4% of sales.