Asos has seen its share price drop by over 8% after its underlying revenue fell by 14% to £2.5bn in the year to 31 August.

The online fashion retailer said that despite overall customer volumes, its retention rates improved, especially among profitable customers.

In this period, its earnings increased by 64% to £131.6m, while its losses before tax improved from £126m to £98.2m.

Asos also recently relaunched the Topshop and Topman brands in a partnership with John Lewis.

The update comes as the retailer said it had dealt with the "legacy of the old model", to address legacy issues. This included the resetting of its inventory position and the completion of a warehouse rationalisation.

As a result, Asos is now working to build a new commercial model "based on speed, agility and profitability".

CEO, José Antonio Ramos Calamonte, said: "Asos has always stood for innovation, energy and fashion that excites. When I became CEO at the end of FY22, it was clear we needed to reset the business so we could deliver that promise for our customers again.

"Three years later, the turnaround is well progressed: we've rebuilt our foundations, sharpened our focus, and we're ready to reclaim our place as the most exciting destination for fashion-loving customers.

"We have tested, refined and built the 'new Asos' to bring customers better products and a more seamless experience. We reshaped our product offering and inventory management, improved our gross margin profile and cost base, and sharpened our customer proposition."

In its outlook, Asos said its core focus remains on sustainable, profitable growth. As a result, it expects its gross merchandise value to show an “improving trajectory” throughout the financial year, and is set to be three to four percentage points ahead of its revenue performance.

Furthermore, its adjusted earnings are set to grow to between £150m and £180m, supported by continued gross margin expansion, and variable contribution and fixed cost discipline.

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, said that Asos is on its way to delivering better profitability to its shareholders.

He concluded: "Don’t worry too much about the double-digit sales decline for now. It’s part of the strategic shift, as Asos chose to remain firmer on pricing by not moving as many clothes to the sales racks last year. While that’s making for some tough comparable figures on the top line, profitability is starting to reap the benefits, with gross margins and underlying cash profits landing well ahead of the prior year.

"While this is all positive, there’s still a long way to go and a lot of challenges to navigate before Asos returns to the land of profitability. Active customer numbers and order frequency are still heading in the wrong direction. That’s partly due to the reduction in discounting activity and the shift in focus away from less profitable customers."

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