TFTT Friday Review
This week has provided another reminder that growing sales and building a stronger business are not necessarily the same thing.
In Monday's Briefing, we questioned whether fashion brands have become too reliant on promotions and discounting to drive sales, and whether the industry has inadvertently trained customers to wait for the next offer rather than pay full price.
This week's results from ASOS, Ralph Lauren and Next bring that discussion into sharper focus. Each business is facing a different commercial challenge. ASOS is rebuilding profitability, Ralph Lauren is demonstrating the value of brand desirability, and Next is showing the opportunities and complexities of international expansion. But there is a common thread running through all three: the quality of growth matters just as much as the quantity.
There is also a wider economic backdrop. The Bank of England has increased interest rates to 4%, against a backdrop of rising energy costs and continued inflationary pressure. For consumers and businesses alike, the cost of borrowing and the cost of doing business remain important considerations.
Across all three company updates, one question stands out: what does profitable growth actually look like?
ASOS: THE TURNAROUND IS PROGRESSING, BUT THE JOB ISN'T FINISHED
ASOS has delivered a significant improvement in profitability as its transformation continues, although the full-year results demonstrate that the business still has some way to go.
Adjusted EBITDA increased 29% to £170.3m, compared with £131.6m the previous year. Adjusted gross margin improved by 3.4 percentage points to 50.5%, marking a second consecutive year of more than three percentage points of expansion. This reflects better buying and sourcing, improvements in inventory management and the increasing contribution of flexible fulfilment models.
There was also an important milestone in the final quarter, with GMV returning to year-on-year growth for the first time since FY22. The year-on-year GMV trend improved throughout the year, with the fourth quarter delivering 4% growth. Customer acquisition also strengthened, with new customer numbers increasing 6% in Q4, and the customer database returning to quarter-on-quarter growth.
However, the full-year picture needs context. GMV was still down 5% to £2.35bn, while adjusted revenue declined 9% to £2.24bn. Active customers were down 4% for the year and total shipped orders declined 6%. ASOS also reported an adjusted loss before tax of £46.4m and negative free cash flow of £16.4m.
There is an important distinction in the revenue figures. Adjusted revenue declined faster than GMV partly because of the growing contribution of flexible fulfilment and commission-based partner models, which change how sales are recognised in the accounts. GMV therefore gives a more complete picture of the value of merchandise sold across the platform.
The statutory result was a profit before tax of £24.4m, but this included £164.5m of gains from the disposal of its Atlanta and Lichfield fulfilment centres, partially offset by other adjusting items, including a technology impairment. It is important to distinguish that reported result from the underlying adjusted performance.
Separately, ASOS has also had to address a cybersecurity incident following an attack on 6 October. Its investigation confirmed that an unauthorised party gained access to an employee account by impersonating a trusted contact to obtain login credentials. These credentials were then used to access information on certain third-party platforms used by ASOS.
The investigation found that some customer names and contact details, alongside certain non-personal account-related information, were accessed. ASOS confirmed that no payment card information or account passwords were accessed, and that its website and app remained safe to use throughout. The investigation is now complete.
While this incident is separate from the FY26 financial results, it is an important reminder of the responsibility online retailers have to protect customer information and maintain trust. For a business operating at ASOS's scale, technology, data security and the reliability of its customer communications are fundamental parts of the proposition.
ASOS has outlined its priorities for FY27, targeting low-single-digit GMV growth, adjusted EBITDA of £180m to £200m and positive free cash flow. That represents a move from stabilising the business towards delivering sustainable growth.
THE TFTT INSIDER VIEW
What ASOS demonstrates is why the quality of revenue matters. Improving gross margin, buying discipline and cost management can make a significant difference, particularly for a business that has been carrying too much stock and operating with an expensive cost base. But operational improvements cannot permanently substitute for customer demand.
One of the most encouraging aspects of the results is the improvement in full-price sell-through, alongside better inventory health. This is important because reducing the need to clear stock through markdowns is one of the most effective ways of improving the underlying economics of a fashion business.
The cyber incident also highlights another part of the equation. Customer trust is hard won and can be quickly damaged. For online retailers, protecting customer data and maintaining confidence in the digital experience are just as important as having the right product and proposition.
The real test now is whether ASOS can turn its improved commercial foundations into sustained sales growth, stronger customer retention and more frequent purchases. The return to GMV growth in Q4 and the improvement in customer acquisition are encouraging signs, but the business needs to demonstrate that this momentum can be sustained throughout FY27.
A healthier cost base is important, but ASOS ultimately needs customers buying more of the right products, at the right price, more often. There is a significant difference between stabilising a business and rebuilding its growth. The next stage is about proving that progress is sustainable.
RALPH LAUREN: THE COMMERCIAL VALUE OF BUILDING BRAND DESIRABILITY
Ralph Lauren has delivered another strong set of results, demonstrating the commercial value of a brand that continues to resonate with customers.
Quarterly revenue reached $2.19bn, up 9% on a reported basis and 10% in constant currency. Average unit retail increased 9%, while global direct-to-consumer comparable store sales grew 10%. Adjusted gross margin also expanded by 2.5 percentage points, supported by stronger average selling prices, favourable geographic mix and lower product costs.
The regional picture is particularly interesting. Asia revenue increased 28%, with China growing by more than 35%. North America revenue increased 6%, while Europe was much more subdued, with revenue up just 1%.
More importantly, European comparable store sales actually declined 1%. Physical stores were down 4%, although digital commerce grew 9%. This suggests that while Ralph Lauren continues to attract customers online in Europe, its physical retail performance is facing a more challenging environment.
Asia tells a very different story, with comparable store sales increasing 24%. This is not simply a case of one region outperforming another on revenue. It demonstrates how different markets can be at very different stages of growth, and why understanding local customers, distribution and brand positioning remains so important.
The company has also raised its full-year revenue and adjusted operating margin outlook, reflecting a stronger-than-expected first half. That is a positive indication that the performance is not simply being driven by one particularly strong quarter.
THE TFTT INSIDER VIEW
Ralph Lauren is showing what happens when product, brand positioning, customer experience and distribution work together. Its 9% increase in average unit retail, alongside strong full-price demand, demonstrates the commercial value of a brand that can command higher prices while continuing to attract customers.
This is about more than simply increasing prices. It is about creating a proposition that customers believe is worth paying for. Product quality, consistency, brand identity, marketing and the overall customer experience all contribute to that perception.
But even the strongest global brands cannot assume that performance will be consistent across every market. Asia is delivering exceptional growth, while Europe presents a much more challenging picture, particularly in physical retail. Getting the balance between stores and digital right is just as important as understanding the strength of the brand itself.
For other fashion businesses, the question is whether they are investing in the things that make customers genuinely want their brand, or simply investing in ways to make customers buy.
This takes us straight back to Monday's discussion about discounting. Ralph Lauren is continuing to build brand desirability, giving it a stronger opportunity to protect its pricing and margins. But how many other fashion brands are doing the same? Or are too many relying on promotions and discounting to drive sales and growth?
The strongest brands give customers a reason to buy. They don't simply give them a reason to wait for a better price.
NEXT: INTERNATIONAL GROWTH IS ONLY VALUABLE IF IT DELIVERS A RETURN
Next has delivered another strong trading update, with third-quarter full-price sales up 8.1%, ahead of its expectations. But the real story is where that growth is coming from.
International online sales increased 32.2%, while UK full-price sales grew by just 2%. UK retail store sales declined 1.7%. International is clearly becoming an increasingly important growth engine for the business, particularly as the UK market becomes more challenging.
There is more to this story than simply strong overseas demand. Next said its international sales outperformance was driven by better-than-expected marketing returns, allowing it to increase international marketing investment by 67% compared with the previous year. This is an important distinction: the business was able to spend more because its marketing was delivering better returns than anticipated.
However, there is a particularly interesting detail in the results. All of the sales outperformance came from international markets, generating around £5m in additional profit. But that benefit was offset by increased international operating costs.
The company also highlighted the impact of the new EU tariff regime, which came into effect in stages during 2026. Some orders placed by EU customers are still fulfilled from UK stock, creating additional import costs. Next expects this to create a separate net cost of approximately £5m this financial year, after other savings. It expects to mitigate these costs over time through operational changes and selective price increases.
Despite the strong international performance, Next has maintained its full-year profit before tax guidance at £1.255bn. It also expects international growth to moderate in the fourth quarter as it compares against stronger growth in the previous year.
THE TFTT INSIDER VIEW
International expansion is often presented as the next big growth opportunity for fashion brands. But too many businesses focus on the size of the market and the potential sales opportunity without properly understanding the cost of getting there.
Next has the infrastructure, scale and experience to operate internationally. Even so, its latest results demonstrate how additional operating costs can absorb the profit generated by sales outperformance.
There is an important lesson here for businesses of all sizes. International growth requires investment, and that investment needs to be understood before entering a new market. Distribution, local partners, customer acquisition, marketing, fulfilment, returns, tariffs and the cost of servicing customers all need to be built into the business plan.
For smaller fashion businesses, getting the operating model right can be the difference between a successful international expansion and an expensive exercise in chasing revenue. The right distributor, the right marketplace strategy or the right local partner can have a significant impact on the economics of a market.
Next's results also show why marketing returns matter. Spending more is not necessarily a problem if the additional investment is generating profitable sales. The challenge is understanding what that investment delivers once all the other costs have been accounted for.
International expansion needs to be measured by the quality of the profit it generates, not simply the revenue it adds. Growing internationally is an opportunity. Building a commercially sustainable international business is the real objective.
THE BIGGER PICTURE: THE QUALITY OF GROWTH MATTERS
Looking across this week's results, there is a consistent message. ASOS demonstrates the importance of operational discipline and rebuilding the foundations of a business. Ralph Lauren shows the commercial value of brand desirability, pricing power and creating genuine customer demand. Next highlights the importance of understanding the true economics of international expansion.
Three different businesses, three different challenges, but one common question: are fashion businesses creating sustainable, profitable growth, or simply chasing sales?
With interest rates now at 4%, continued pressure on household spending and rising operating costs, there is little room for businesses to get the fundamentals wrong. Discounting might generate a short-term sales uplift. International expansion might deliver impressive revenue growth. Cost reductions might improve the immediate numbers. But none of these, on its own, guarantees a stronger business.
The real challenge is bringing together the right product, a compelling brand proposition, disciplined buying, effective distribution and a clear understanding of profitability.
THE TFTT INSIDER PERSPECTIVE
Having worked across fashion brands, retail, wholesale and international distribution, one thing becomes very clear: the strongest businesses understand that growth is not a single commercial decision. It is the result of getting multiple parts of the business working together.
A brand can grow sales but destroy margin through excessive discounting. It can enter new markets but fail to understand the cost of serving them. It can improve profitability through cost reductions but still struggle to create the customer demand needed for its next stage of growth.
These are not isolated issues. They are connected.
The businesses that will be best positioned for the future are those that understand the relationship between brand desirability, product, customer demand, inventory, distribution and profitability. This is also why we believe the industry needs to move beyond celebrating sales growth in isolation.
Revenue matters. Market share matters. International reach matters. But ultimately, what matters is whether those things create a healthier, more sustainable business.
And perhaps that is the biggest question coming out of this week's results. Are fashion businesses building businesses that customers genuinely want to buy from, or are they becoming increasingly dependent on commercial tactics to keep sales moving?
Because there is a fundamental difference between selling more and building more value.
The strongest fashion businesses will be those that know how to do both.
TFTT | INSIDE FASHION, NOT OBSERVING IT.
