Asos Plc sales fell and its loss grew in the first half as the British online retailer tried to cut inventory and excessive discounting.

Asos sales dropped by 8% in the six months through February. Operating losses widened to £272.5 million ($344 million), according to a May 10 statement. CEO Jose Antonio Ramos Calamonte said the business has made progress in its turnaround despite “some very challenging conditions.”

Like other online-only retailers, Asos has been hit hard by rising return rates. But unlike rivals Zara and Boohoo Group Plc, Asos hasn’t introduced a fee for online returns.

Aside from Asos sales challenges

It has been nearly a year since Ramos Calamonte took the reins at Asos. He seeks to convince investors that his plan will return the business to profit by reducing stock, cutting spending and slowing automation in some of its key warehouses. The company is writing off as much as £130 million of stock and in January, Asos started a deal with Secret Sales to sell discounted items.

The benefits of the turnaround are expected to come through in the second half, with Asos generating cash once more, as remedial measures offset sales that are still forecast to decline. The company said there will be a free cash outflow for the full year of £100 million, the bottom end of guidance.

Asos sales are struggling as Britain’s cost-of-living crisis pushes shoppers to prioritize their spending on essentials like food and energy rather than fashion. Rival retailer Next Plc is also seeing falling sales with less demand for weddings and other events.

The retailer has agreed a small extension to its £350 million revolving credit facility with lenders, pushing the deadline for repayment out to November 2024 from July 2024. The facility also steps down to £220 million by August next year.

Asos is building a management committee to support its overhaul as Ramos Calamonte has been managing the company with an almost entirely interim team. It has hired Michelle Wilson, former private banker at Berenberg, as senior director of strategy and corporate development. Dan Elton joins as senior customer director, with previous experience at Made.com and J Sainsbury Plc. Asos is still seeking a chief financial officer after only managing to hire a temporary replacement despite months of searching.

Asos ranks No. 17 in Digital Commerce 360’s Europe Database. Next Plc ranks No. 21.

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