UK's ASOS forecasts return to growth as turnaround gathers pace

Nov 5 (Reuters) - British fashion retailer ASOS forecast a return to sales growth and annual profit above market estimates on Thursday, as a turnaround built on fatter margins, cost cuts, and tighter stock control gathered pace.

Retailers in the UK are battling Chinese rivals to win over cash-strapped shoppers grappling with high mortgage costs, a weak job market and rising energy bills.

Faced with rising costs, supply-chain disruption and more cautious consumer spending, ASOS has lifted profit and rebuilt its customer base by improving sourcing, cutting discounts, and selling off assets. It has also expanded its commission-based Flexible Fulfilment model, which avoids holding stock. 

It reported an adjusted core profit of £170.3 million ($229.72 million) in results for the 2026 fiscal year on Thursday, beating analyst expectations.

ASOS shares, which have risen over 50% so far this year, were up over 4% in early trading.

For the fiscal year ending August 2027, ASOS said it expects group gross merchandise value (GMV) to grow in the low-single-digit range, reversing a 5% decline in the previous year.

Its GMV has been improving every quarter, touching low-single-digit growth in the fourth quarter, helped by gains in the UK, Germany and the United States.

Despite a temporary blow from an October cyber incident, ASOS said trading in the first eight weeks of the fiscal year had been encouraging, with its active customer base rising about 1% to 16.5 million by the end of October.

ASOS guided for adjusted core profit of £180 million to £200 million for the current fiscal year, above a company-compiled market consensus of £177 million.

"This is an encouraging start to the year in our view, particularly when combined with the overall challenging clothing market in (September)," JPMorgan analyst Georgina Johanan said in a note. 

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(Reporting by Raechel Thankam Job in Bengaluru; Editing by Ronojoy Mazumdar and Joe Bavier)