I’ve been watching ASOS with a mixture of professional concern and genuine affection for the better part of three years. In The Rabbit Hole Got Deeper , published yesterday , I made the case that the discovery model that built UK online retail is breaking. Conversion rates declining. CPA rising 22% year-on-year. Organic search contracting while paid search tripled its share. The brands that built their model on cheap discovery economics running out of road.
I wrote that piece with ASOS in my peripheral vision the entire time. I didn’t name them directly because it wasn’t only about them. But the data describes them precisely. The online pioneer has been in a period of structural recalibration for three years now, and this morning’s H1 FY26 interim results are the first moment where I think the honest answer to “is this working?” might actually be yes. Provisionally. With caveats. But yes.
Let me show my working.
The Numbers
Losses before tax for the half-year period ended 1st March 2026 were £137.9 million, down from £241.5 million in the same period last year. Revenue under £1.2 billion, a 14% drop from £1.3 billion in H1 FY25. On the surface, that looks like a business still going backwards. Revenue down. Still loss-making. Still burning cash in H1. Maybe better revenue - relative to the delinquent customers they had 3 years ago - causing all kinds of crazy.
But the surface is the wrong place to look right now. What matters is the structure underneath it. The turnaround has been about insourcing, better inventory management and to Jose’s huge credit, huge credit - get it? Institutional finance has given them 3 refinance opportunities - bought them runway. And this was not without risk - once bad quarter and covenants kick in - ask many football clubs about this. Debt instruments can be punishing.
Gross margin grew to 48.6% from 45.1%. Adjusted EBITDA rose 51% to £64 million, driven by gross margin gains and cost efficiencies. Profit per order increased 30% year-over-year, supported by higher average order value and reduced return rates. The underlying returns rate reduced by approximately 160 basis points year-on-year.
Eight consecutive quarters of gross margin improvement. Read that again. Not one good quarter. Not a one-off clearance benefit. Eight in a row. That is a structural shift in how the business operates, not a lucky set of conditions.
Inventory fell 10% in H1, with management saying stock remains tightly controlled and health is improving. Sell-through rate on autumn/winter stock improved 60 basis points year-on-year, with the CEO describing it as the highest sell-through ever for the company.
For a business that was drowning in dead stock two years ago , fake fulfilling, sitting on inventory it couldn’t move, running promotions that were hollowing out its margin architecture , those are not small numbers. Those are the numbers of a business that has genuinely changed how it buys and trades.
The Other Number
Buried in the results, and not getting nearly enough attention, is this: for the first time since September 2021, ASOS recorded positive growth in new customers. In March 2026, new customer acquisition rose by 9% for the group. In the UK specifically, new customers increased by approximately 10% year-on-year. The customer database has also shown signs of stabilisation, with churn reducing by 150 basis points during the first half.
This is the one. Everything else in this results pack , the margin improvement, the EBITDA growth, the cost discipline , is the foundation. But a fashion brand with a shrinking customer base is a fashion brand with a structural ceiling. The moment new customer acquisition turns positive is the moment the turnaround stops being a cost story and starts being a growth story.
App downloads moved from a negative year-over-year trend to more than 30% growth. ASOS implemented 50 new app features in H1 , including virtual try-on, ways to style, and a more immersive trending section. Customers engaging with the updated app are buying 9% more.
Building on the success of ASOS.World in the UK, which has reached approximately 3.5 million members , up from 1 million at the end of FY25 , the loyalty programme has recently been rolled out to customers in the US, Germany and Austria.
3.5 million loyalty members in under a year from a standing start. That’s not a vanity metric. That’s the beginning of a owned channel that doesn’t depend on Google’s auction.
Was I Right? Was I Wrong? Let’s Be Honest.
I have been a long standing skeptic and I offered where I was wrong all the way too, but In The Rabbit Hole, I argued that the discovery model that built UK online retail is breaking , that brands substituting earned traffic with bought traffic are on a countdown timer. I cited the Mapp Fashion Intelligence data showing the “danger zone”: brands running paid at 4-8% of their traffic mix producing average operating margins of 3.7%, improving in only 48% of cases.
ASOS has been living in that danger zone. And what this results pack tells me is that they’ve been trying to get out of it , just more quietly than the headline numbers suggest.
Management said ASOS is shifting to more top-of-funnel activity and will continue weighing marketing alongside other investment options such as product quality and customer experience. Marketing spend increased by 50 basis points while the company reduced the cost of acquired visits. Less spend per visit. More top-of-funnel. More owned channel via the loyalty programme. More in-app engagement as a retention mechanism rather than discount dependency.
That’s the right direction. It’s early. The Mapp data suggests UK conversion is still declining industry-wide , the group reported a 9% year-over-year decline in GMV, though underlying data suggests a recovery is underway. You cannot fully insulate yourself from a structural market problem by changing your own behaviour, no matter how well you execute. But the direction of the response is correct. And against the backdrop of that market profile, it makes this story all the more noteworthy. I would love to interview the leadership and offer them credit where it is due.
Where I was right: the inventory-to-cash argument. I’ve been saying for eighteen months that day trading , the real-time read of what’s selling, what’s stalling, and how fast you can turn stock back into cash , is the most important skill in ecommerce right now. The ASOS results validate that thesis from the inside. The CEO explicitly described moving away from “a lot of stock, a lot of promotion, and a lot of performance marketing” toward a model “based on newness, excitement, and full-price sales.” That’s the trading model. That’s the discipline.
The Adidas collaboration sold out in three days, with 80% sell-through and best sellers north of 90% over that period, even after doubling the buy. Overall Adidas sales on ASOS rose 43% year-over-year. That’s what good trading looks like. Limited buy, curated product, emotional urgency, full-price exit. The antithesis of the promotional model that nearly destroyed them.
Where I’m still watching: the revenue line. The group maintained its FY26 guidance, expecting adjusted EBITDA between £150 million and £180 million, with gross margin projected to improve by at least 100 basis points to a range of 48% to 50%. But GMV is still negative , down 9% in H1 , and the market’s patience for “profitable decline” has limits. The question isn’t whether the turnaround is happening. It demonstrably is. The question is whether the revenue inflection comes fast enough to keep the market’s confidence before the balance sheet becomes the story again. But again is this better GMV - can they sustain this against more new customers and less churn - manage this and this is a truly awesome turnaround story.
Free cash flow was a £93 million outflow in H1, described as consistent with seasonal working capital patterns, with an H2 inflow expected to deliver broadly neutral free cash flow for the full year. After the period end, ASOS also repaid £74 million of the remaining 2026 convertible bond. The balance sheet is being managed. But it’s being managed carefully, not comfortably.
The Jeffers Variable
Which brings me back to Natasha Jeffers.
I wrote about her appointment earlier this month , the CV that teaches rather than impresses, the career that spans the full arc from ASOS’s golden era through Arcadia’s decline, Forever 21’s fragility, and Amazon’s operational discipline. I said then that this looked like a bet on the right skill for the right moment.
Today’s results confirm the bet and raise the stakes simultaneously.
ASOS has fixed the foundations. The commercial model is cleaner. The inventory is healthier. The margin is structurally improved. Now the problem is growth , and growth in a market where, as the Mapp data shows, organic discovery is contracting, paid costs are rising, and the old playbook of “buy traffic, push promotions, move volume” no longer works.
What you need in that environment isn’t a brand marketer or a performance marketing specialist. You need someone who can read the trading signal every morning, connect it to the assortment, adjust the pricing and promo architecture in real time, and make the storefront earn its own traffic rather than pay for it. You need someone who understands that womenswear, the priority category, outperformed Group GMV in H1, delivering approximately 10 percentage points of improvement in its growth rate versus H2 FY25 , and can build on that signal rather than wait for the next quarterly report to confirm it.
The rate of sale for Heart items , ASOS’s monthly curated edit , doubled versus other items. That’s curation working. That’s the ASOS of 2008 visible in the data of 2026. The instinct is still there. What it needed was the infrastructure and the discipline to scale it.
Jeffers has built both. At every stop on her career.
What Numbers Would Give The Market Confidence
GMV turning positive. The sequential improvement is real , GMV improved 4 percentage points from Q4 FY25 to Q1 FY26, followed by a further 2 percentage points in Q2 FY26. That trajectory needs to continue into positive territory. The guidance frames GMV running 3-4 points ahead of revenue as flexible fulfilment scales. The market needs to see that inflection before it commits.
New customer retention, not just acquisition. Getting new customers in March at 9% growth is the green shoot. Keeping them through Q3 and Q4 , getting them to their second and third purchase , is the proof. Churn reducing 150 basis points is the early signal. Current trading in Q3 shows further sequential improvement, with womenswear entering positive year-on-year growth. That needs to hold.
UK as the proof of concept. The UK is ASOS’s largest market and the one receiving the most investment , loyalty rollout, out-of-home advertising, returns improvements. The UK performed 4 points better than the rest of the company early in Q3. If the UK can demonstrate what a recovered ASOS looks like , positive GMV, positive new customer growth, improving retention , it becomes the template for Germany, France, and the US.
Gross margin holding above 48%. The structural case for ASOS’s recovery rests on the argument that the new commercial model , full price, curated, lower markdown , is permanent and not a function of current conditions. If gross margin holds or improves while volume recovers, that’s the proof. If volume recovery requires reverting to promotional depth, the story falls apart.
The US. The group faced £7 million in costs related to IEEPA tariffs in the US and has initiated a process to pursue refund claims. The US is the wildcard , tariff volatility, de minimis changes, and a market where ASOS has never quite cracked the cultural code. A stabilised US is enough. A recovering US would change the conversation entirely. Although, they would amke it to “the list”. A list worth taking for cash in the bank. US expansion can and should wait - the US consumer has options.
The Floor
I titled this piece The Rabbit Hole Has a Floor because I think that’s what today’s results represent. Not a full recovery. Not a share price catalyst. But evidence that the descent has stopped , that someone has put their hands out and caught the walls.
The discovery model that built UK online retail is still breaking. The structural pressures I described yesterday haven’t changed because ASOS posted better margins. UK conversion is still falling. CPA is still rising. Vinted and Temu and TikTok Shop are still eating at the edges of a market ASOS used to own.
But ASOS, specifically, is doing the things that give it a chance. Cleaner inventory. Better curation. A loyalty programme with genuine early traction. A new customer trend that’s turned positive. And now, a trading operator in the most important commercial role in the business.
The rabbit hole has a floor. Whether ASOS can climb back out of it is the question that makes this one worth watching for the next twelve months.
I’ll be here.
Sources: ASOS H1 FY26 Interim Results (April 23, 2026); ASOS Pre-close Trading Update (March 25, 2026); ASOS FY25 Full Year Results (November 2026); ASOS H1 FY25 Interim Results (April 24, 2025); ASOS H1 FY24 Interim Results (April 17, 2024); Daily Political , ASOS H1 Earnings Call Highlights (April 23, 2026); FashionUnited , ASOS results: revenue declines, adjusted EBITDA up 51% (April 23, 2026); BusinessCloud , ASOS halves losses as turnaround plan enters final stage (April 23, 2026); Mapp Fashion Intelligence Report 2026 (Sarah McVittie); IMRG Online Retail Index (Andy Mulcahy).