Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's ASOS Trading Update conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star and one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today, Thursday, the 18th of July, 2019. I will now like to hand the conference over to your speaker today, Nick Beighton. Please go ahead, sir.
Thank you, operator. Good morning, everybody, and thank you for dialing in today at relatively short notice. I am joined today with Alison and our new CFO, Mat, who will be adding to the presentation as we go through. As you are aware, we are currently working through a major overhaul of our warehouse and tech capabilities. This transformational change was to enable us to access significant future global growth and future efficiencies. We did have ambitious plans for landing this change, and it has been a lot bumpier and taken a lot longer than we initially planned. Specifically, automation in the Euro hub and building out our branded stock pool in the U.S. is the issue we are currently wrestling with.
These issues have restricted product choice and availability for our customers in the U.S. and Europe, which have a corresponding impact on sales growth in these regions, as well as profitability in the form of higher transitional costs to fix the issue. I am going to walk you through some of the operational challenges now so you can get a handle for where we are at. Europe, starting with the Euro hub automation. The main issues we have had have been with the operation of the automated storage and retrieval system, or, as we refer to it, as the OSR. On go-live, it initially ramped up very well, but it did not handle the inbound put away at the scale we required, which resulted in an inbound backlog, simply meaning customers were not able to shop our newness.
We had a similar issue with the returns process in the OSR, which to help alleviate this, we did direct some of our European return centers to Barnsley, which further restricted available product. The impact clearly fell the hardest in the German and French market, where in Germany, there is an underlying and higher returns rate, which is normally the newer product. On outbound, again, this initially ramps up well, but we have had some issues with the product labeling, which is the pick algorithms. Essentially meaning orders arriving at the pick bench incomplete and needing to be canceled, and we were not getting the operational efficiencies that we expected. As a result of these issues, trading stock was actually negative in Europe during the period. If I go into an availability stat, it is around 10 percentage points less product availability for the European customers.
We saw a much higher proportion of stock not available to be picked, therefore not be available to be fulfilled or seen by the customers. You can see by the impact of the restricted stock quite clearly in the difference between visits. Within Europe, visits were up 19%, with order growth only up 11%. We can see further evidence of how restricted the stock availability from Euro hub has been, where Spain and Netherlands, where we pointed these two territories to Barnsley to help ease the pressure on the ramp up, have both materially outperformed the rest of Europe during June. Undeniably, our plans for landing the automation were ambitious, we did go in with a degree of confidence, given we've successfully done this on many warehouses before and embedded strong change within Barnsley.
We have built some contingency into our plans, of course, the magnitude of the impact was ahead of our expectations, both in terms of the scale of the sales disruption and the complexity of the issues we faced, hence time taken to unpick and resolve. We now expect to have embedded the automation, the tech change, by the end of September. We're making progress week by week, we're seeing encouraging spikes every time and demand conversion every time we make progress. To give you a sense, the inbound issues have been resolved. We're very close to resolving the returns processes and pointing things back to the Euro hub, we are now working hard on unlocking the rest of the stock and improving the outbound and therefore operational efficiency. Turning to the U.S.
Our operational tech footprint is stable, has been stable now for most of the quarter, we're focused on building out our product offer for the U.S. customer and building out the right width of stock in Atlanta has been the key issue, particularly with third-party brands, which has been a much slower process than we had originally thought, as some of these brands have not shipped directly into the U.S. before. I'll run through some of the specifics. It's worth pointing out at this point, the problem is with third-party branded stock, particularly at the higher price points. Hence we've seen the impact on the ASP and therefore the average basket within that period. Order growth was actually ahead of the revenue implied by the sales growth.
In terms of specifics, we found brands who haven't previously delivered to the U.S., as I said before, have been slower with some of their U.S.-specific compliance issues, ranging from country of origin tags in their product, documentation, to individual requirements which are new for many of our partners, Prop 65, which is chemical composition, and manufacturer or factory ID pins. We are making good progress on building out the U.S. stock pool, it's going to be more gradual than we thought. We expect to be around 80% of the Barnsley group by the autumn, from a low point of around 50%.
To give you a qualification of how we've done with ASOS product, where we've not had the same issues because we were better prepared with all of that, ASOS branded sales throughout the quarter were up 26% in the U.S. and increasing throughout that period, which really does demonstrate the impact of the stock width and the stock pool, and how well our ASOS brand is actually resonating in the U.S. Looking at the U.K. and rest of world, these have been fulfilled by Barnsley. There's been some small impact, but you can see U.K. and rest of world have been much stronger, and that's been led by ASOS Design sales. Sales growth in the quarter of U.K. was plus 16%. Of course, you don't need me to tell you that's been a challenging couple of months in the U.K. market.
It does demonstrate how our brand is still resonating and demand is less of the problem, and we've been improving our demand characteristics throughout the period. Moving on to demand generation. In terms of the right business trajectory, visits and customer acquisition, which are both great indicators of momentum and how we resonate with our target customers, are moving strongly in the right direction. This has given me confidence that we've corrected the brand-related issues we talked about some months ago. I've seen specific improvements in our social media, velocity, and engagement, our product presentation, our product newness, all driving stronger customer acquisition during the quarter. You can see this within visits growth. Visits growth in Period 3, we're up 16% and on an improving trajectory throughout the period, exiting in a strong place.
We ended June with 20 million active customers, and new customer acquisition is recovering, having been marginally negative in P1. The active customer growth was solid in the period, and particularly in the younger demographic, and we continue to have a reducing churn rate in the period from our existing customer base. Turning to product. We called out ASOS Design specifically in the first half, as growth was only 5%. This was disappointing. It was still early days, but the growth has stepped on in the period, and the exit rate was double digits for the group and much stronger outside of the EU. This was despite availability issues, of course, availabilities in the EU.
If you look at the U.K., the best read of how well the ASOS Design is resonating with our customers right now, the mix shift in the quarter was 3% during Period 1, which is really encouraging, and ASOS Design sales are growing faster than the territory performance of 16%. Moving on to future capability. I want to give you a bit more detail about the organizational changes we've been making. You may have read we're in the process of reorganizing certain areas of our business to ensure they're structured appropriately and set up for our future growth ambitions. This entails strengthening our leadership teams to ensure we have the right roles and skills in place, which is appropriate for the increasingly global scale and complexity of our business, and to deliver the benefits of the massive infrastructure program we've been undertaking.
This will involve a number of new roles created at the top of the organization, which will sit alongside the CFO, myself, the CIO, and the COO. We've also taken some action in streamlining other functions to improve the efficiency. To conclude, before I hand over to Mat, who will walk you through some of the numbers in detail, we're confident our performance in the period reflects temporary operational problems due to the execution of the significant infrastructure change we've been going through. You'll also see the other stats I've walked through is underlying trajectory, demand generation, and resonance with our customers is improving, and we're confident of making meaningful progress week by week, both in the Europe operations issues and U.S. in building out our stockpool. Thank you very much. We expect more of that to come into the future.
I'll now hand over to Mat now, who'll talk you through the financials.
Thanks, Nick. Good morning, everybody. I'm going to look to give you a bit more detail on the numbers and specifically walk you through our revised expectations, given we expect the warehouse transition issues that Nick's been speaking about to impact the remainder of the financial year. Overall, we now see sales guidance for the full year being broadly in line with the performance year to date. Our PBT for the year being between GBP 30 million and GBP 35 million. Let me now try and explain the drivers of that impact. The impact is in the order of GBP 20 million-GBP 25 million against our previous guidance, all of which is in the remainder of the year.
The big drivers are disruption costs as we move beyond the planned transition period for Eurohub, the continuation of missed sales associated with the restricted stock availability that Nick has been speaking about, and some incremental markdown to clear stock that has ended up in the wrong place as a result of the transition or has not sold through as we initially planned. Finally, in addition to these impacts, there is the incremental GBP 3.5 million of restructuring costs, which we have announced today. In terms of splitting it by warehouse, approximately GBP 15 million of the impact relates to the Eurohub and circa GBP 4 million to the challenges in the U.S. Whilst our revised guidance reflects the impact on the rest of the year, we have already absorbed a number of impacts. These have been offset by planned contingency and cost savings across our business.
Overall, for the full year, we are now expecting incremental transition costs of GBP 12 million versus our previous expectations in addition to the GBP 3.5 million of restructuring costs. In terms of the more detailed moving parts within this year, we now expect gross margin to be circa 250 basis points negative year-on-year. The movement in this guidance from the previous 150 basis points is also largely a result of the operational challenges we have spoken about, with adverse territory mix and incremental markdown costs, as I mentioned earlier. We have also seen some impact in support of the customer engagement activity that Nick has just been speaking about.
Our net debt at year-end will be circa GBP 100 million, driven by the flow through from earnings, expected capital creditor movements, and working capital moves associated with the impact of lower sales, where we incur the impact of these immediately on cash receipts but pay the associated cost typically 45 to 60 days later. To wrap up, execution of our logistics program has been challenging, and this has led us to reduce our expectations accordingly, as I have just outlined. We are clear on the root causes and are moving decisively to address them. As Nick has said, we now expect to complete automation of the Eurohub by the end of September, with gradual build to full target stock within the U.S. by the end of the autumn.
Whilst these issues are short-term in nature, we do expect it may take some time to regain and reactivate any impacted customers, and we'll provide a further update at our full-year results in October. I'll now hand back to Nick to wrap up and move into Q&A.
Okay. Thank you, Mat. I'd just like to summarize with a couple of points. We've made clear progress in reactivating customer engagement and demand, as evidenced by improving traffic, improving product velocity, and improving ASOS Design sales. The major overhaul of our infrastructure has been bumpier and taken a lot longer than we originally anticipated. We're in a position where we're clear on the root cause, and we're solving these issues quickly and expect to have them done by September, as Mat's just mentioned. None of these changes change the opportunity ahead for us, which remains huge. The transformational change we undertook was all about accessing that future growth, moving from U.K.-centric to global-centric, and capturing that availability. I'm clear this is not a demand issue. Demand is improving throughout the quarter.
We're clear that we've identified the next level of problems, we have a roadmap to fix it. We acknowledge that this is a failure in execution or planning around that execution, around the operational changes. The senior team are working hard on it, in terms of operations, and we're augmenting our senior leadership team to capture the future benefits coming. We have taken the right action in terms of removing, and streamlining, and taking some fat out of our business where we thought it was there. The organization, ironically, will be much leaner and much fitter with a much greater level of capability, by the end of this period. At the same time, I'm delighted that ASOS Design brand is improving rapidly, which will give future benefits for our organization. Okay. I'd like to hand over to the Q&A now.
Thank you, ladies and gentlemen. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star and one if you wish to ask a question. Your first question comes from Anne Critchlow from Société Générale. Please go ahead.
Thanks. Good morning, Nick. Morning, Alison.
Morning, Anne.
Could I ask you what the retail gross margin did in 3P, and why the entire transition costs seem to go through the gross margin downgrade and not through operating cost of sales, where there actually seem to be some savings?
Right. What we've guided for the full year is that retail gross margin will be down circa 200 basis points from where we were previously at Sorry, 250, from where we were previously at 150. What we've done within that is we've continued to invest in price, doing the right thing for the customer and the brand. We've also had a very good look at any potential terminal stock issues, largely in relation to the U.S., and taken some action to ensure we don't carry any terminal stock into the next period. What we've also done as a matter of course, is we've continued to invest in all the right things in terms of marketing, in terms of brand engagement, to keep on building our customer acquisition.
Okay, thanks. I'm still struggling to understand why there seem to be some savings in your cost to sales ratios, where I would have expected perhaps warehousing costs to go backwards given the transition costs.
Transition cost in warehousing has gone backwards. For the period, it will be GBP 47 million versus GBP 35 million, Anne. It's a GBP 12 million incremental transition costs in fixing the remaining issues and the delayed efficiencies coming through in the operation.
I think, as we also mentioned in the statement, there are a number of cost savings across the business. A number of those will impact some of the lines you're describing. I think you can't necessarily disaggregate the transition cost from all of the other moving parts within our cost base.
Just to be clear, Anne, the transition cost, the incremental ones we're calling out, that doesn't correspond to the change in gross margin guidance.
That's right.
They are two separate issues.
Sure.
I can pick that up with you afterwards, and I'll walk you through, but I think you might have just put one number into another there.
Okay, great. Thank you.
All right. Thanks, Anne.
Thank you. Your next question comes from the line of Charlie Muir-Sands from Exane BNP Paribas.
Morning, guys. Thanks for taking my questions. Trying to actually more about next year and understanding how much of this year is just going to stay within this year. Firstly, I wondered if you could give us an indication as to how much you think transition costs will drop by next year, and whether there's still some next year that then drop in the year thereafter. Secondly, how much you expect to save from the three and a half million GBP of restructuring costs? Thirdly, are you still committing to rebuild to that 4% EBIT margin? If so, by when? Finally, do you still anticipate spending GBP 150 million on CapEx next year? Thank you.
Okay. That is, I think it's best if Mat answers on those specifics. Charlie, to Mat
Yeah. Charlie, I can understand the interest, but I think it's appropriate to pull you back to the statement, the fact that we'll give an update at the full year results. I think to comment on the specifics, it's just too early for us to do that in a meaningful way.
In terms of the last point, we are committed, and haven't changed at all, to rebuilding our margin. That's one of our key focus points.
4%, but you won't say by when.
Not this morning.
All right. Thank you very much.
Thanks, Charlie.
Thank you. Your next question comes from the line of Simon Irwin, Credit Suisse. Please go ahead.
Morning, all. A couple of questions for you.
Morning.
Firstly, you talked about strengthening the leadership team. How far advanced are you, and how much visibility are we going to get on this? At the moment, one's vision of ASOS, I'm afraid, doesn't get much lower than the C-suite. Are we going to get names and positions and a bit more confidence that you do have the bench strength across the board, and when these people are going to be in place?
Yeah. I'm at long list stage with most, and some are at short list stage. When it's appropriate, of course, I'll share the names and positions and what they're doing, Simon. I'm certainly not there yet.
Okay. Realistically then, these people aren't going to be in place for another six months plus.
It's probably six months would be the right expectation.
Okay. Is there any scenario you can currently envisage which would require you to raise more equity?
You'll have noticed we have improved and increased our RCF, and that's just sensible financial management to take those questions off the table. If there was something that we saw that we thought would augment our growth, then that might be something that requires an equity raise. Not suggesting for any minute that that's in our plans or we've got the CapEx or at all, but that would be a scenario in the spirit of the question you're asking.
Okay. Just one final one. Can you just give us the gross margin for the U.K. business on a standalone basis in P3?
No, we don't give that out. We'll give you more clarity in the full year results.
Right. Okay. Thank you.
Thank you. Your next question comes from the line of Tushar Jain, Goldman Sachs. Please go ahead.
Yeah, hi. Good morning, everyone. A couple of questions. Is it possible for you to break down how many brands in the U.S. you face that specific compliance issues which led to the delay or sort of what their contribution to the sales is? That's my first question. The second, in terms of the IT system, especially around automation and warehouse, is the way to look at it is just one-off, or you will need to require more investments in your IT systems that was sort of an issue a couple of years back. My final question, just trying to clarify, I think throughout the prepared remarks, you said that you are seeing the demand increasing, but then you're also seeing that in the outlook statement that it will take some time to regain the demand. I'm just wondering what is the delta there?
Is it the new customer are coming back, you need to reignite your older customer? If you can give a little color on that. Thank you.
Okay. I'm not going to give you the number of the U.S. brands. If I give you this sort of proportion. U.S. is largely a width issue. If Barnsley is 100% width, the width in front of customers for our total offer right now is 50%. ASOS Design is around 73%. The width is building more gradually, or slower than we thought with third-party brands. Some third-party brands, we are just not going to be trading in the U.S. Those are more European ones because the compliance burden, from the things I said earlier, is too great for them. We're expecting to get around 80% width versus Barnsley by October. So that's that piece. I can't remember any specific on the automation, Tushar. Can you just ask me that one again, the second?
Just in terms of you highlighted that you had some challenges interaction between your automation warehouse and your warehouse software management system. I'm just wondering, is it because of the systems are old or it's just some technical issue that could be resolved without having a huge investment in IT?
Okay. There's two aspects to the software. One is the warehouse control system, and the other one is the warehouse management system. Both are third-party pieces of software. The warehouse control system controls the interaction between the mechanization, automation, and people's operations. That's had some challenges, particularly in the OSR, as I outlined. The warehouse management system has also had some issues, both third-party, software-related issues with a third-party vendor's software. We didn't expect that level of software issues when we started off, we are working through them and knocking the issues off quickly.
Got it.
To be clear, for the rest of the year and into September, we've expected no improvement in the operational efficiency while we work through those issues with our supplier.
Got it. My final question, just in terms of demand.
What was that?
Sorry.
Obviously, some customers have been impacted by the stock availability issues. I guess all we're trying to recognize is that some of those may have not had the perfect experience and therefore we might need to reactivate specifically impacted customers.
Well, my script, we talked about canceled orders. During the last quarter, the ASOS experience for largely our European customers has not been as good as it once was and will be. Those are the things we are being cautious about.
Got it. All right. Thank you very much.
Thank you. Your next question comes from the line of Simon Bowler from Numis. Please go ahead.
Hey, Simon.
Morning. Three kind of quick questions from myself, if that's okay. Firstly, you kind of mentioned kind of satisfaction with the headroom to your RCF, I wonder if you can give a little bit more color in terms of whereabouts you're expecting peak drawdown to get to over the year ahead to give a bit further comfort on that. Secondly, I don't know if you can talk any more specifically around the timing of some of those issues, particularly in the Euro hub warehouse and becoming apparent and building it. Sounds like it was an issue to do with the ramp-up phase as you went through the period. Then finally, is there anything further you can give in terms of confidence or color around whether this will impact your kind of build-up to peak trading?
It sounds like the issues are hoped to be resolved around autumn time, I guess that is running at somewhat close to kind of build up ahead of Christmas peak.
Okay. I'll do the latter two. I'll need Mat, who gave a deeper explanation on some of the numbers, then to come back to the headroom point. The second one on timing. This was an 8-week ramp up. It started early May. It initially went from 0 to 1 million units of output within a period of 2 weeks, which was much greater than we thought. To give you a reference, it took something like 13 months for Barnsley to get the same level of output. It went very well from a low base. We've stuck around that level for a period longer than we thought. The volumes went backwards slightly. It broke through to another level in terms of inbound and outbound.
We've had moments where it's been far stronger. We've had moments where it was not broken through in a consistent way. The stability of the underlying code has affected some of those timings during the 8-week period. That's what we went through in terms of the ramp up and scale up. What we're effectively saying, an 8-week ramp up will be more like 16 weeks building into September. What it means in terms of impacting peak, we're expecting to have all this resolved and the product to be building up into September. We start moving towards our peak trading period in October, November. Remind you what I just said earlier in my overview, we're expecting U.S. random stock to hit the 80% level by October anyway.
Just I guess to your question with respect to the RCF, it would probably be wrong for me to comment on specific levels within that. Our strong expectation would be that we would have a significant amount of headroom under the RCF based on our current plans for the future with respect to the capital guidance that we previously commented on, et cetera. I think you can see the RCF is purely to give us appropriate balance sheet flexibility. Our approach to that has been prudent with respect to net debt, which remains effectively around 1 times as projected for the end of this year.
Okay. Thank you.
Thanks, Simon.
Thank you. Your next question comes from the line of Paul Bonnet, Bank of America. Please go ahead.
Hey, thank you so much for taking my question. My question is on the, you used to have a free cash flow guidance for free cash flow for next year. I just wanted to know if it still holds.
Sorry, was that free cash flow for next year?
Yeah, because you used to have a positive free cash flow guidance for next year. I just wanted to know if it still holds.
Mat, I feel I'm at risk of repeating myself, we're obviously not giving F20 guidance at this stage, we'll give a fuller update at the full year results.
Perfect.
I think the only thing I could say is that the issues are short-term in nature, I'd point you back to the statement with reference to that.
Okay. Perfect, thank you. Maybe one more question. Can you comment maybe on the retail growth margin by region a little bit, if possible?
No, Paul. We'll do that in more detail in the full year results.
Okay, perfect. Thank you so much.
Thank you. Your next question comes from the line of John Stevenson, Peel Hunt. Please go ahead.
Morning, guys.
Hey, John.
I have a question as well, so sorry. Morning, then. First thing, you talk about the customer metrics and some of the churn rates in Europe in particular. I guess, you've hit them with price rises at the back end of last year, and now obviously we've got an availability issue. What are you seeing in terms of the customer sort of performance effectively? Are people turning away, and what are you going to have to do about that? Second, on the U.S., can you just update-
I'm sorry, stop there, John.
I'll stop.
You will see in Europe, I said it earlier, that visits increase in Europe is up 19% during the quarter on an increasing trend.
Okay, what about churn?
Say that again. You know we don't give churn out, I also gave some color that we are reactivating customers faster than we were in the H1 and reducing churn of existing customers during that period. I also acknowledge that some of our European customers will not have had anything like the service they should expect from us, and it will be better.
Okay. Okay, perfect. Moving on to U.S. in terms of next day capability, can you just give us an update in terms of where you are? Also for both U.S. and Europe, whether what's been going on has impacted your marketing plans, whether that's been sort of social or just in general in terms of backing the launch of U.S. and later cuts off in Europe.
We've launched next day delivery propositions in some major East Coast cities and four West Coast cities within the last four weeks, as we said we would. Slightly later than we originally thought. We've launched those with customers, and we're happy with the early reactions on them. I'm not going to give you any more details on that, but apart from at the time we said we'd do it, we know that's a first for ASOS and a first for ASOS customers, and they're the big East Coast and the big West Coast cities. I'm confident that will be another differentiator for the ASOS brand in the U.S. In terms of marketing, we haven't cut back any marketing in any territories. We're getting good activations with existing customers, particularly the younger demographic, which we were struggling with in the first half.
We have no intention of not continuing to acquire those customers wherever they may be.
Okay. Lovely. Cheers, Nick. Actually, while I'm on, just a final question, just in terms of stock levels in Europe, what's it looking like at the moment? Are you able to actually clear?
Right. I said during the quarter, some of the stock levels available for our trading stock were negative. Still the case, but improving.
Okay. Okay. Cheers, Nick. Thank you.
Bye.
Thank you. Your next question comes from the line of Wayne Brown from Liberum. Please go ahead.
Morning, Nick.
Hey, Wayne.
Hey, how you doing?
Good.
Good. Just a couple of questions on inventory. I think you've been speaking about trading inventory. Whilst I'd love to hear numbers, if you can't give the numbers, if you could maybe just speak qualitatively of where your inventory levels or your total inventory levels are at the moment.
Right
versus where you plan them to be ahead of peak this year. Also qualitatively, what is your strategy around Brexit, around the 31st of October? Should we be expecting a bigger peak and a hump as we're going into peak trading? I'd like to put it into context of where we are right now. Thanks.
All right. I'm not going to give you any numbers on the actual inventory levels. You know that.
Yeah.
Clearly, we've been suffering with trading availability, our availability in front of customers, particularly in Europe, as I said earlier, and in width in the U.S. in third-party brands. Width in the U.S., we're expecting to reach the 80% versus Barnsley by October. The overall inventory levels in the business are under control. However, more in the U.S. than we wanted. What we've taken is some extra markdown activity to cover that, so we don't take any inventory that we don't want into the autumn-winter season. For example, what I mean by that, if a product is designed for eight-week selling period, and it was due in in June and it now arrives in July. It's lost four weeks of its potential selling ability.
What we've done within the guidance is taken the appropriate action to mark that down to make sure the seasonal elements are cleared within the most seasonally relevant period. That's called markdown, to ensure we're not carrying over any inventory into autumn/winter that we're not happy with, which is all about the retail margin guidance for the full year.
Okay. Can you also then give us a timetable of what the practical applications are that's going to be able to give you the confidence to clear that stock? Clearly, you've had these technical issues, but practically, what's going to happen between now and October that gives you the confidence that you'll be able to clear the previous season stock so that the inbound stuff won't necessarily get caught up in the clog in the entry point into the system?
Okay. The previous season stock is currently this season. It's commonly known as a markdown, and to make sure to reset your inventory levels. That's what's happening right now.
Okay. One last question then. With regards to, just to get your view as to why GBP 350 million is the right number for the RCF, and to what degree was there pressure from your credit insurance to get that size of an RCF?
No credit insurance pressure whatsoever.
Okay.
This was about ample headroom and making sure as debt rolled down, liquidity was never going to be an issue. This is something that will roll for five years and give us the flexibility to chase anything that comes our way if we need to, without worrying about liquidity.
If we play the worst-case scenario that these problems continue for longer than what you were hoping for, maybe as we even approach peak, then your liquidity within the RCF would be absolutely fine. There are no concerns there.
Absolutely right, Wayne.
Thank you. Thanks.
Any more questions?
Right. I think we're getting to final questions. One more. Anyone got one more or shall we close it there?
We have further questions. Would you like to take one more, sir?
Go for it.
Your next question comes from Miriam Adisa from Morgan Stanley. Please go ahead. Hi. Sorry. All of my questions have been answered. Thank you.
All right. Fine. Thank you, Miriam. All right. In which case, I'll wrap it up. Thank you for joining, guys. Just to reiterate what I said. We're confident this is less of a demand issue. We've identified a roadmap of working extremely hard on fixing the operational issues. We know this has not been the best execution of some of these things, and we've taken that one accordingly. We're rebuilding the senior team, as I talked a bit about. We will emerge leaner and fitter with a much better operating P&L when we complete all these things. I'm happy with the uptick in our customer engagement and the reactivation, particularly through ASOS Design. All right, guys. Matt and I will speak to you soon. We'll be around for the rest of the day if you want to follow up with any points, [as well as Andy]. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.