ASOS Plc (ASC.L) Q4 2026 Earnings Call Transcript

Phil Clarke: Okay. Good morning, everybody. Welcome to the ASOS Full Year 2026 Results Presentation. We're going to follow the usual format this morning. Jose will come up and present. Aaron will then run through the numbers. Jose will then give an update on the strategic progress. I'll come back and we'll host Q&A. We'll do Q&A in the room, and then we'll do any Q&A from the website. So Jose, thank you.

Jose Antonio Calamonte: So good morning, everyone, and welcome again to our end of year results announcement. As Phil said, we have felt a little bit creative. So we're going to follow exactly the same order we followed last year so that you guys know exactly what to expect. And before we start, I wanted to give you a little bit of a word on the incident we had at the beginning of the month. As you know, the 6th of October through social engineering and unauthorized party sent a push notification to some of our consumers. We took immediate action and always with the intention to protect our consumers, we took the necessary actions to contain the incident. And as a precaution, we first isolated the account and the system. And second, we launched a full investigation with external experts. As we mentioned previously and repeating now, this investigation that has recently concluded found that this unauthorized party access was limited to basic personal information. No password, no credit card information was accessed. And throughout the whole incident, the web and the app remained operational and safe. So -- and obviously, after that. As part of the measures we took, we paused part of our marketing and our CRM activity, and that had a certain impact on our trading, mainly in the U.K. And as we have shared this morning, we have quantified that approximately between 2% and 4% of our GMV during these weeks. And in spite of that, we have seen that the business has proved to be very resilient. We've seen that in these weeks, the number of consumers has continued growing, and our total sales have remained broadly flat, which obviously gives us confidence, as I said, about the resilience of the business, but also about the fact that this impact will be temporary, and we are confident we will go back to normal. That's it on the incident. I want to move on into the results, which is obviously what brings us here and what we are more passionate about. So let me start by saying that what a year this fiscal year '26 has been for us. What a year, a year where we have come back to growth, where we have seen our customer database growing quarter-on-quarter. If it was not happening since fiscal year '22. Our gross margin, again, growing and above 50%, our EBITDA growing and on the top end of our guidance, reducing our net debt, I think we are really satisfied with the advance we've seen this year. And all this was underpinned by a continuous implementation, a continuous developing and deployment of our strategic plan of making more relevant product, more inspirational shopping experience and a more efficient operation. If I'm going to summarize the year in 3 ideas, always like to do that, again, being innovative. The first one would be we continue delivering. This is something that we take a lot of pride in. We are -- this is another year where we are delivering on the things we promised. This year was especially important for us to go back to growth, and we have come back to growth in Q4. And this growth has been fueled by operational excellence. I'm going to go a little bit deeper and give you more color on that. But if I want you to take the ideas with you today, these are the 3 that I would like you to stay with you. So let me give you a little bit of more color on what has happened during the course of the year. And let me start -- I always like to start with this by reminding you, and I know you know very well, what is our ambition and how do we build this ambition. Our ambition is to be the global destination for young fashion lovers, the most exciting destination for the people who really love fashion. And we're building that on 3 strategic pillars; delivering the most relevant products and this relevance is built on a structural speed and the right selection of partners, providing our consumers the most inspirational shopping experience, a shopping experience that is built on outfits, is built on personalization, it's built on social and is built on an immersive approach and all this supported by efficient and scalable model. We have been working hard to get here, and this company has been through a big transformation during the course of the last 4 years, starting in fiscal year '23 when this was about stabilizing and in the following years, when it was about rebuilding the business model, driving for profitability and finally getting to growth. And during the course of these years, we have seen a big change in some of our key variables and key indicators. We've seen huge change in stock levels, in speed to market, in total cost, in EBITDA, in net debt. I think when you look at these variables, you see that the business you're looking at today is completely different from the business that you were looking at 3 years ago. This fiscal year '26, we have got to a point that we feel we have really made significant progress when we talk about the midterm guidance we gave you back in fiscal year '23. If you look at inventory days, there has been a massive reduction of -- I cannot read it from here, but it's 26% and we are very close to be in the level that we gave you as our midterm ambition. When we talk about CapEx as a percentage of revenue, we told you it would be between 3% and 4%. This year has been in 3.4%, so bang on where we wanted to be. When we talk about gross margin, we told you we would be going on the direction of 50%. This year, we have crossed the 50%, so where we wanted to be. When we talk about structural free cash flow, we said we wanted to have structural positive free cash flow. So we are where we wanted to be. And when we talk about EBITDA margins, we said that we would like to get on the direction of 8%. We have closed the year on 7.6%, pretty much where we wanted to be. And we said the last thing is like we will go back to growth. And in the last quarter, we have gone back to growth, not in full year, but in the last quarter, we have gone back to growth. This return to growth has been built on rebuilding our customer base. It's the growth of our customers. We always said, if you remember when we were here at half year, we said customer base, new customers is the leading indicator of growth. Here, you can see how the customer base has been growing, especially on this last part of the journey because we were aware that during the previous parts where we were adjusting our business model, obviously, the number of customers was going to be impacted. This growth of the customer base has been driven by a reduction in the churn, has been driven by an increase of reactivated customers, but especially has been driven by a growth in new customers, which is especially relevant for us because it means that the new customers -- or let me say it differently, that the new value proposition is resonating with new customers. And it's not only that we're getting more new customers, it's that we're getting more valuable new customers. These new customers are buying more full price than before and then their value as customers is growing. But if we look at the last 6 months of the year, they are also buying more categories and their return rate, we measure how many of them buy again after 90 days is growing. So it's not just pushing new customers, it's pushing better new customers, which reinforces our comfort that this is the right direction of travel. If we look at the evolution of customers, new customers and sales, I think it is quite clear that when we said that the customer base was the leading indicator of the evolution of sales, it's really proving right and correct. And this evolution has been an evolution that has been broadening during the course of the year. If you remember, when we were here on half year, we told you the U.K. starts to give good signs. And we told you we are focused on the U.K. and Womenswear and the U.K. starts to give good signs. By the way, this is U.K., Germany, U.S. and France, which are our top 4 markets. I know you knew that, but just in case, I just want to. So what we saw during the second half of the year is that the U.K. and Germany were getting better. The U.S. started to improve, still on the negative side, but starting to improve and so did France. When we look at Q4, we see the U.K. and Germany doing even better. The U.S. moving into growth, and then France improving, but still not on growth. So we see an improvement everywhere. As we told you, we would start focusing. Focus was one of the big words, and this has been broadening as we expected. When we look at the business from a different perspective, Womenswear has been very positive as we shared in H1, and it has only got better. Menswear has improved, but we still have job to do as we have acknowledged in our announcement this morning. And this improvement has been based, as I said before, on operational excellence, on doing what we do better. So let me walk you fast through some of the things we have done during the course of the year. When we're talking about our product and making it more relevant. What we have done this year is making our product faster, more flexible with better quality and more relevant which is not a few things. It's quite a lot. With Faster, we still see our Test & React working well. It's still more than 20% of our own brands come through Test & React. But if I go broader, it's like 40% of our range is already produced in less than 6 weeks, not only Test & React, the other programs continue accelerating. And the remaining part that is more long lead time has been accelerated by 30%. When we talk about more flexibility, our more flexible formulas keep on growing. Today, it is more than 20% of our business with brand partners that goes through these more flexible formulas. More than 170 brands are working with us either through Partner Fulfils or ASOS Fulfillment Services. We have invested in the quality of our products, improving the quality of our fabrics, making more consistent products by the use -- by extending the use of blocks, anticipating QA in origin to make better products. And we see that the evolution of returns based on the quality of the product has reduced significantly, so the consumers are really seeing that. And we talk about more relevant, I've always been saying that we want to put in front of the consumers what is exciting for them, what is really relevant. And that has been done by a more active and better management of what we put in front of them. This is what we call smarter and sharper buying. Let me give you a little bit of color on this one. I will not walk you through everything, no worries. So when we talk about sharper and smarter stock management, this comes to a systemic approach on how do we manage the stock. This is just an illustration, even though it's real and how do we measure our stock? How do we measure what we buy, the number of options, how they are performing, the missed opportunity of these options to what extent we are selling as much as we could or we are missing sales because it's not properly bought. And all this intelligence is put into action every single week. The result of that is that we have taken our sell-through to the highest point since we changed the commercial model. It has improved -- the 12-week sell-through has improved 70 points year-on-year. And when we look to the last 6 months, this improvement is significantly bigger than that 70 basis points, sorry. And obviously, that means more full price sell-through and means higher margins as you have seen in our in our accounts. If I move into a more exciting and more inspirational shopping experience, what we have done during the course of the year is to do better and more marketing. We have enhanced our customer proposition, and we have continued in the revamping of the shopping experience. When I talk about doing better and more marketing, we have continued learning how to do better marketing, how to get more bang for the buck. And a result of that, we have increased our investment in 120 basis points. It is a profitable investment. So the better we do it, the more we can invest, the more we can invest, the more can we grow, and that is always positive for us. We have enhanced our customer proposition with things like, for instance, we have pushed our cutoff for next-day delivery in the U.K. up to 11%. We have continued pushing our loyalty program beyond the U.K., where 74% of the customers are already in the loyalty program to Germany and to the U.K. and Austria. And we have continually involved -- sorry, invested in conversion improvement measures to make sure that the customer proposition remains as relevant as possible. And with the app, with the shopping experience, we have implemented more than 100 changes, 100 improvements, and that has increased the engagement in more than 80 basis points. We measure engagement as the relationship between the daily and monthly users. So people are coming more times during the course of the month. We're receiving more visitors -- sorry, more visits per visitor. Let me illustrate one thing here. One of the changes we have made on our marketing is what we call The Heart. The Heart is where we -- I think you would say, where we put our money where our mouth is. So basically, we make an alignment between what we want to tell the consumers and how we buy. We want to make sure that when we are pushing something, we are really backing that with enough stock and then there is an alignment between the stock, the product deals and the sales. So in this selection that, by the way, is a multi-brand selection. So we are pushing not only our own brands, we're pushing our brand partners because as we have always said, we believe that the value of ASOS is this multi-label approach and this total look in a realistic way. We have backed our options more than 50%. That has gone to an increase in reach of more than 35%. These options have increased the rate of sale, how fast we sell them by 19% during the course of the year, accelerated significantly in Q4 to 40%, and it has doubled their contribution to sales. So it is working. And that fact that it's working helps us put more money behind it and then attract more new consumers and then the flywheel keeps on going. Then last but not least, we will have to do that while we make our model more and more efficient. Three big things here. Obviously, network optimization, supply chain, as always, I always talk about supply chain, but we go from good things to good things here from strength to strength and operational execution in general. On the network optimization, we finally transitioned out of the U.S. Plus, as you know, we sold the 2 unused warehouses. That obviously has helped us a lot with our balance sheet. And on supply chain through automation and efficiency projects, we have improved. We have reduced our cost to serve by 130 basis points. And on operational execution, we have continued to implement AI projects that are helping us to do what we do better and faster. Again, let me illustrate one of the things. In this case, I want to talk to you about what we call MPDP, you're going to love our acronyms, Missed Product Delivery Promise. This is pretty much when we measure the percentage of our product that arrives here when we want it to be here. This is important because if the product is here on time, then we can do things like The Heart that I told you before, and we can sell it to the consumers when it's relevant to them. So it is very important that the product arrives on time. So during this year, what we have done is we have completely, I would say it's not automated, but we have put a lot of intelligence and a lot of controls in an automated way behind a very complex process that starts when the moment we place the order, the moment the supplier finished the production hands over in the origin. This is handed over to the forwarders. The forwarder is bringing it here, is hand over to customs and so on and so forth. It's a quite complex process. We are measuring that. And with the use of machine learning, we are finding the weak spots and accelerating. During the course of this year, we have improved in 40 points the capacity to deliver on time, and we are very confident that this is only going to increase for the coming year. When you put it all together, I think a good example, as I said before, is when we talk about Womenswear, where we saw our product improving, both on our own brands and our brand partners, the quality improving, the product marketing improving, but the evolution has been clear. H1, we did a minus 2%. H2, we did a plus 8%. Q4, we did a plus 10%. So we see that when we are doing our job, this is really working. And we are confident that we are transporting some of these learnings, many of these learnings to the other side of the business network. So as I said to you, the year in 3 messages. We are happy with the consistent delivering, and this is part of what we really want to continue. Part of this delivery or this commitment for this year was to go back to growth, and we went back to growth in Q4, and this growth was based on a lot of things. I only illustrated a few of them with this idea of operational excellence. I'm going to hand over to Aaron that is going to give you the real stuff, not the bulls*** as I do, and I'll come back at the end to tell you a little bit about the next year.

Aaron Izzard: No bulls*** coming. So, thank you, Jose. And first of all, welcome, everyone, from my side. I'm going to walk you through the FY '26 performance, which highlights a really, really strong progression and clear evidence of 3 things. ASOS is a dramatically improved business from when we started this transformation, both from a financial position and financial performance perspective. We've consistently delivered on our promises, as Jose said, and we structurally improved the underlying economics of the business ready for growth. With this, a return to sustained growth provides us the opportunity to transform our P&L and free cash flow in FY '27 and beyond. Now as Jose said, on the theme of innovation, unfortunately, if you're expecting a different set of slides than I've always shown, you're going to be disappointed. So apologies about that. One thing I can promise that's transformed is the content within it with the significant progression that we've seen. So turning to the highlights for the year. You'll have seen many of these in the statement, but I just want to call out some of the critical points. The headline figures, of course, show meaningful progression, but there's been continued improvement throughout the year. This is seen most prominently in our GMV growth. Overall, GMV growth versus revenue was a 4 percentage points difference. But the true story here is the quarter-on-quarter improvement. In H1, we were minus 9% year-on-year. In H2, minus 1% and back to growth in Q4. Importantly, this is sustainable and profitable growth. This, of course, shows up in our EBITDA performance, 29% up year-on-year. And within that, gross margin continues to improve, 340 basis points improvement year-on-year. Cost to serve, whilst the headlines show a 120 basis points deterioration, captured within this is a significant increase in our marketing investment as we shared at half year, and we always plan to do. We've reduced our net debt by 40% year-on-year. The material driver of this, of course, was the disposal of our 2 noncore warehouses for a combined GBP 116 million. Net debt is the lowest it's been for 5 years, and the net debt-to-EBITDA ratio has reduced to 0.6 from 2.6 at the start of the transformation. Free cash flow, slightly behind expectations. We continue our discipline on CapEx and inventory, but with our improved EBITDA, that has generated improved structural free cash flow, but this was masked by some timing difference in working capital, which I'll share a bit more in a minute. So as Jose shared earlier, a key theme in FY '26 is the spreading of these positive trends across the geos as the year progressed. GMV growth improved in all segments in H2, which included improvements in visits, basket sizes and active customer trends, which were encouraging across the board. The U.K. led the charge with GMV growing 2% year-on-year in H2, and this continued the trends in H1 as our core leading market. We extended our focus in H2 to Germany and the U.S., 2 of our remaining 3 core markets, and we saw significant improvement, as Jose shared, with Germany growing in H2 and U.S. growing in Q4. Both though have had different approaches to the rebuild based on our more localized approach to winning in these markets. Germany, for example, focused heavily on proposition improvements and marketing drops, whereas the U.S. benefited from more disciplined pricing and more localized talent. I previously highlighted the importance of rebuilding the active database initially through new customers, and I'm really pleased that the database closed at GBP 16.4 million, flat with the exit rate in H1 and included strong new customer progression, particularly in the U.K. Gross margin continues to strengthen, 340 basis points to 50.5%, meeting our mid-term target of 50%. And since we began the transformation, gross margin is up 600 basis points. This is a structural sustainable improvement and a result of the operational excellence that Jose has already talked about. There are 2 core drivers within this, which explain both the short-term progression that we've seen, but the long-term progression over the full transformation. The first is the continued enhancement of the operating model, lower discounting, better full price sell-through and better buying margins. This exemplifies and shows proof that customers are willing to pay full price if we put the right product with the right experience in front of them. The other key lever of our success is our flexible fulfillment offering, offering greater choice, greater availability and the growing share of this no inventory risk channel via flexible fulfillment structurally improves gross margin, and we have further to go. Achieving our mid-term target here facilitates a strong level of profitability and allows us to continue to consider reinvestment options as we further drive forward in FY '27 and beyond. Now our third strategic pillar, the efficient operating model is now fully embedded in our ways of working and processes. And we've seen material improvements in the operational efficiency in the last few years, and that was no different in FY '26. I want to be clear, as I have been before, this is not saving our way to success. We're not reducing service levels or impairing the customer experience. After adjusting for volume and flexible fulfillment deleverage, our underlying efficiencies created were partially reinvested back into marketing as we said we would. Among the many investment -- sorry, many initiatives, sorry, to create this fuel, distribution carrier renegotiations, warehouse efficiencies through optimizing our footprint, but also driving automation efficiencies within the warehouses and rationalization of our central costs, including a 17% reduction in central headcount. We'll continue to focus on driving these efficiency gains in future and selectively reinvest to fuel growth. So putting these 3 dynamics together, the impact on EBITDA, adjusted EBITDA has been material. We delivered a 29% uplift year-on-year to GBP 170 million, above the midpoint of our guidance. Volume declines were more than offset by gross margin improvements and cost-to-serve savings were partially reinvested back into growth in the form of marketing. An important point about the cost to serve efficiencies though, it doesn't only generate headroom in our P&L. It also structurally improves the underlying economics of our business and allows us to reinvest back into higher return on investment growth opportunities such as marketing and the other investments that we continue to make. Finally, we delivered an EBITDA, adjusted EBITDA margin of 7.6%, which is touching distance of our mid-term target. Turning to free cash flow. We saw a GBP 16 million outflow with strong seasonal inflow in H2, reflecting our normal cycle. Despite improved payment terms across our supply base, the outflow reflects temporary working capital drag, which includes a $9 million inflow of tariff refunds, which we subsequently came in post year-end in September. CapEx remains tightly controlled at the lower end of our guidance and significantly below the depreciation and amortization bill that includes historic nonrepeating infrastructure investment. We'll come on to guidance shortly, but I think it's important when considering free cash flow into next year and beyond that our interest and nonrecurring adjusting items will become much smaller drag on free cash flow generation. One of our strategic priorities has been to fix our balance sheet, and we took strong step forwards this year. First, we completed a major refinancing in November '25, lowering interest costs and extending the tenure of our first lien debt out to 2030. We also repaid GBP 74 million of our convertible bonds that expired this or reached maturity this year. And we sold our 2 noncore assets, generating GBP 116 million of net cash inflow. Our net debt was supported or net debt movement was supported by this sale, of course, partially offset by noncash interest accretion, some refi fees and the marginal free cash outflow discussed on the previous slide. We closed the year with cash of GBP 328 million, and we have GBP 87.5 million of undrawn facilities at year-end. And of course, we have plans to deploy this cash to restructure our debt stack, further reducing our go-forward interest exposure. Now one -- this is the new slide, by the way. This is the exciting bit. I want to take a moment to just share our warehouse footprint following the disposal of our 2 noncore fulfillment centers that we've shared previously. This leaves 2 main fulfillment centers servicing our global network. So one in Barnsley in the U.K. and Berlin in Germany. These warehouses have high levels of automation, significant useful life remaining and also sufficient capacity for order growth in excess of 30% in the future. During FY '27, we've also planned further investments in automation within both of these fulfillment centers to enhance our go-forward efficiency and optimize our footprint further. Turning to current trading. We're really happy with our trading performance at the start of FY '27. As Jose shared, GMV growth is broadly flat year-on-year in the first 8 weeks, which includes the temporary disruption from the cyber incident in early October, which we estimate had between 2% to 4% impact on the top line, which is mainly concentrated in the U.K. This in part reflects the temporary switch-off of our marketing and CRM as we reacted to the incident. Despite this, though, the total active database continues to grow, building on the momentum we saw in H2. And both in September and October in both the U.K. and globally, we saw growth of the active database sequentially. And these trends underpin our FY '27 guidance, which I'll cover on the next slide. So for FY '27, we expect low single-digit growth in GMV, further improvements to EBITDA, along with positive free cash flow generation. CapEx will be at the upper end of the midterm targets previously shared at 4% as we invest in high ROI warehouse automation projects discussed previously. Combined interest and leases will reduce or cash costs of interest and leases will reduce by GBP 10 million to GBP 15 million year-on-year with further opportunities to enhance that with any refi activity. And our net debt movement will reflect this free cash flow, also adjusting, of course, for any interest accretion or impacts from any future refinancing. So to close, we anticipate FY '27 to be another year of meaningful progression, both from a customer perspective and financial perspective. And we see significant headroom in both EBITDA and growth as we move forward in FY '27 and beyond, which we'll share more details at Capital Markets event later in the year. And with that, let me hand back to Jose.

Jose Antonio Calamonte: Thank you, Aaron. Well, now that we have gone through the solid and thorough part of the presentation, let me ask you to please relax a little bit. I want to take you on a little journey with me. Let's see how it goes. Let me tell you a little bit about how do we see the coming 12, 24, 36 months of ASOS. And it starts with where do we see growth coming in the future. We were not sure how to represent that graphically. Let's see if we did a good job or not, it will happen at the end. We see 2 different growth engines that are going to support the growth of ASOS, as I said, in the next 12 to 36, 48 months. On one hand, what we call short term, the things that are going to have an impact faster is we continue improving our operation. We continue bringing more exciting product, more inspirational shopping experience, better efficiency in our operation. What we have done, let's continue doing what we have done great. But there is another opportunity, and this is what is going to drive the growth, not only of ASOS, but also of ASOS in the midterm. And we see a great opportunity coming from a reshaping in the shopping experience that is going to happen in the market. And these 2 opportunities are not independent. They are linked and one builds on the other one. We need to continue bringing our operational excellence. That will become the platform that we use to build this midterm. So let me give you a little bit of color in these 2. On the first one, short-term operational excellence. This is about doing more of the things we have been doing this year. And I am only illustrating a few here. I don't want to track you through all the details as I normally do. As I said, I wanted you to relax. We will continue making our product more relevant. We will continue investing in Test & React in flexible models, bringing more inspirational collabs. We're bringing Barbour and adidas Drop 5, but there will be more. There are more in the pipeline coming. We are working on Menswear, as I told you, to apply the learnings from Womenswear. And we have a big project that we call Fashion Frontier. I will give you a little bit of color right after that, that we are convinced is going to help us bring more, better, faster and more relevant product. We will continue working on making our shopping experience more inspirational, more relevant. And as we make our marketing more efficient, we will continue investing more in marketing, always with -- if you want with the target that it's going to be profitable investment. But we have the plan to invest more because we see the room for that. We are going to continue doing initiatives like The Heart, bringing our loyalty program to more and more consumers and improving the value of our loyalty program, improving our delivery proposition, not only in the U.K. but in other markets. And we will continue working on the efficiency of our model. We have indicated a few things we're doing with AI, but here you know the sky is the limit. We are having more and more projects here that help us to do our job better and faster. We see more opportunity for automation and improvement in efficiencies in supply chain that we are going to execute. Let me illustrate, as I told you, Fashion Frontier is a project that we are very passionate about, and we already have started to see some of the outcome. What is Fashion Frontier? We are completely rewiring the backbone of how do we create products. This is pretty much reinventing the system that is behind our product creation process end-to-end. This is a very strategic project that we are doing in conjunction with Microsoft. This is a strategic alliance we have with Microsoft and where we are working together both companies very, very closely and it's helping us to simplify, to accelerate and to -- I don't know if that word exists, but I'm going to create it now, agentify the way we do products in ASOS. We are connecting more and more agents to make sure that we can deliver what we do faster and better, and that is going to give us faster speed more reliability in bringing the merchandise on time, and that means higher margins because we're selling the right things to the consumers at the right time. I know this sounds a little bit abstract. Let me give you some specific examples. And these are examples that are either starting to be real or starting to operate or are going to start to operate in the next weeks. These are just 3 illustrations of some of the agents we're putting in place. We're putting in place what we call a purchase order management agent, pretty much is managing all the timings when the orders are placed and modified and is continuously adjusting that. This is, as I kindly indicated before, a quite complex process because it requires coordination with the systems of forwarders, of suppliers, of customs. It is a quite complex process. This project in itself is helping us to save 500 hours a week. There's another agent that we call the catalog agent. When we work with our third-party brands, we need to absorb, ingest information from them. Of course, they all have different formats. They do in different ways, and that requires a lot of people working on it. Our agent is helping us to ingest that and save 300 hours a week. We're talking already almost 1,000 hours a week just with 2 agents. Another example, invoice matching, very, very laborious process of matching every invoice to make sure that everything is perfect, incredibly important for customs declarations, obviously, for our friends of finance. We are saving around GBP 1 million a year. These are just 3 illustrations of the benefits this project is bringing already, and there are many more that are going to come. And as I tell you, we are very, very passionate, and this is just one illustration of the things that are coming this year that are going to continue pushing ASOS into doing things better and into growing profitably and sustainably. Let me tell you now about the second growth engine. The second growth engine that is like we are convincing ASOS that there is a big change that is going to happen in the online shopping market. And this is opening a big opportunity. This big change is coming from the fact that AI is going to transform the shopping experience. I'll give you a little bit more color now, but we are convinced that the existing shopping experience is going to improve significantly. And this significant improvement will make shopping online a superior shopping experience and more people will buy online. And that is going to bring tailwinds to online operators. We think that ASOS has the right assets to be one of the champions in this evolution, revolution, whatever you want to call it. And we are convinced that this is a matter of pace. It's important to get on this train fast, and we are all in to make sure that we are one of these champions. What do we think is going to happen in the market? If you look at today's shopping experience, and I acknowledge this is probably a little bit black and white, like to use that, but I think it helps to convey the message. Today's shopping experience is pretty much transactional. It is having a commercial push, everybody is pushing to consumers. It's overwhelming. There is no question, everybody is completely overwhelmed about the amount of options that offer. It's generic and it's focused on individual products. To give you some examples, AI is coming -- has come to completely change that. The experience is not going to be transactional anymore. It's going to be inspirational. It's not going to be generic. It's going to be totally personalized. It's not going to be with this commercial push, it's going to be completely customer-centric coming from this personalization. It's not going to be based on products. It's going to be based on outfits. This is the evolution from this type of shopping experience to this type of shopping experience, where different consumers may be experiencing the same items in completely different ways because this is what is relevant for them. In ASOS, we are convinced that we have the right assets to be one of the champions. We are convinced that this evolution is going to happen on things like immersion, immersive shopping experience, curated shopping experience, social shopping experience, personalized and based on outfits. The fact that we are a multi-brand creates better and more realistic, more relevant outfits. The fact that we provide to our consumers with our brands that they can only buy in ASOS and with unique colors that they can only buy in ASOS make the curation more relevant for consumers. The fact that we have always had our own visual language makes -- helps make the experience more immersive and more inspiring. The fact that we have always been one of the pioneers in working in social pushes us even more to social. We have the right assets to be one of the champions, and we are convinced that if we continue with our initiative, we will be one of these champions. I'm not going to bore you with all the things we are doing. As Aaron said, there will be time later in the year where we will come with a more detailed presentation. I just want to give you a little bit of a flavor of 4 things we are doing that are foundations in this journey. Let me start with the first one. The first one is what we call AI studio. What you see here, all these features have not been created by -- well, they have been created by humans, but not with a photographer in a place that have been created with AI. That is not very revolutionary, you will say, because there are a lot of people doing that, and that is absolutely true. What we are doing is creating that at scale. Today, we are creating more than 3,000 products a week with this. And what we see is that consumers like it, and they react positively to it. And even more importantly, when we're talking about personalization and being able to show the same product to different consumers in different ways, that requires an access to an unlimited source of pictures. This is what is going to unlock that. Without this, it's impossible to get to also personalization. But this is already real in ASOS. And that is one of the pillars that will help us build this new shopping experience. Another example is when we talk about making it more social. We know that the more social we make, today, shopping online is a little bit of a long experience and people want to make it more social, share it more. And one way of sharing it is being able to incorporate the pictures of the consumers, what we call UGC into the whole shopping experience. To do that, you need AI because you need AI to curate this massive amount of content. Today, we're doing that. We have more than 10,000 products where we're doing that. The products where we're showing these pictures have a conversion rate of 1.5 points higher, which is a significant amount. And this is absolutely critical to increase the confidence of consumers and to go in this direction of social. And again, this is another piece that will come to be -- play a very important role in this journey of going to this new shopping experience. Another example is what we call The Wardrobe. The Wardrobe is where we start using what we know about the consumer, the pieces the consumer already bought with us or somewhere else to create a shopping journey that is absolutely consumer-centric because it starts from where it's relevant from the consumer. How do you make a better use of what you bought last month with us or with someone else? We have already launched a pilot where we are first using what we know about the consumer. So it's The Wardrobe, the pieces they have bought with us, but we will allow consumers to upload the pieces they have bought somewhere else because we have this multi-label open source type of mind. And as I said before, this is critical to change this journey into a completely customer-centric. This will be journeys built from what is relevant for consumers. You will receive a notification saying, "There is a better way to combine the dress you bought last month," and that is very relevant and very consumer-centric. And let me give you one last one illustration. This is what we call our AI stylist. We have talked about that before that we have launched an AI stylist where there are conversations with consumers. Well, we relaunched the AI stylist in October to 50% of the iOS users in the U.K. In just a few weeks, we have seen more than 100,000 conversations. More than 50,000 of these 100,000 conversations have finished into relevant engagement and purchasing. And that is going to be a pivotal piece of how the whole customer journey is going to change. Again, these are only some elements. This is not a complete plan, but I think it gives you an idea of the areas where we are investing, where we're putting our energy, and we will come with a much more complete plan later in the year. When I talk about this new experience, obviously, it's critical to build the experience, but we also want to own the experience. And this is what you have seen lately. We have started our efforts to own this experience. We have launched our campaign and our campaign with Law Roach that, as you know, is the most prominent stylist in the world. These are only 2 elements of a bigger plan that will help us become this value proposition in the mind of consumers, this stylist, this place where we want the consumers to come looking for inspiration, advice on how to answer the question that I always said that we want to answer is like, "What do I wear tonight?" So that's how we are seeing that growth is going to come to ASOS. So I always like to finish with the simplicity of the 3 messages in the same way that I gave you fiscal year 2026 in 3 messages. Let me give you fiscal year 2027 messages. We see operational excellence still fueling growth, especially in the next 12 months. So you will hear more of that from us. we see a great opportunity that is going to trigger more in the midterm, starting in fiscal year '27, but more in the midterm about the evolution of the shopping experience. And we think that ASOS has a unique opportunity to champion that development, and we are absolutely determined to take that opportunity. So with that, we have come to the end. I'm going to hand over to Phil, and we're going to get into your questions. Thank you so much.

Phil Clarke: Great. Thank you, Aaron. Thank you, Jose. I'll just apologize for the bad language during the presentation. It wasn't meant to offend anybody. There's a lot of people in the room. I'm going to ask ideally if you can limit yourself to 2 questions and maybe there will be a second chance to come back. Olivia, I think you put your hand up first.

Unknown Analyst: So just 2 questions from me. So I think a few of the other U.K. retailers have kind of talked about baking in some macro headwinds into their guide. How are you guys kind of thinking about that? And then I think at the U.K. budget last week, they talked about a marketplace tax for foreign retailers. How are you guys kind of thinking about U.K. competition and maybe that bringing some upside to your guide?

Jose Antonio Calamonte: Thank you so much. Do you want me to take the first, you take the second?

Aaron Izzard: Yes.

Jose Antonio Calamonte: Okay. So on macro headwinds, well, this is always -- I'm not sure which one. This is always a conversation in every meeting we have. So like people think, oh, there is macro difficulties. I don't think fiscal year '26 was a year without macro difficulties. we focus on what we can control. We focus on delivering the most exciting product, the most inspirational shopping experience, the most efficient operations. We see that when we do that, we have room to grow, and this is our focus for this fiscal year '27 as well.

Aaron Izzard: Yes. Thank you. So there were a couple of things in the budget. There was the VAT impact as well, which is -- doesn't have a huge impact for us. Look, anything in terms of additional taxes on marketplaces with in support of a level playing field. And the way we think about this, though, is we focus on what we do best, what we do great. And what we've seen, particularly in H2 is when we do surface the right products to consumers with great experiences, all the stuff that Jose shared that customers are willing to pay full price and they're engaging with our offer. We're always in a volatile environment, and we built a really flexible and agile model to be able to deal with that volatility, which will continue. But from our perspective, it's focused on what we do great for customers. And so far -- and certainly in Q4, it's working for us.

Phil Clarke: Alex is going to come to the front with John here, and then we'll do you next, Katie.

John Stevenson: Can you talk a little bit about how you're deploying the increased marketing and how the sort of marketing efficiency has changed as you've sort of been upping the spend? And second question, just on the customer cohorts. You kind of alluded to obviously more frequency. Can you talk a little bit more about how the latest cohorts are performing against historical experience, maybe how quickly that frequency is coming through? Any interesting sort of shifts in spend patterns?

Aaron Izzard: So yes, we have -- as you point out, John, we've increased our investment in marketing, which was always the plan, continuing to drive these efficiencies through all of our business and the whole operation to be able to reinvest back into marketing. So we're really pleased in both our underlying efficiencies and what we've been able to invest in. We think about it probably in 2 ways. I don't want to be too binary about it. But our performance marketing, we always spend so that our marginal pound at the end or dollar is breakeven. We've continued to do that this year. And actually, it comes back to one of the points in the presentation around the fact that with the improved order economics of our business, that has enabled us to be able to spend more and deliver more higher ROI on that TPC spend. So we also then think about our brand marketing spend, which is something that we've been ramping up in FY '26 and we'll continue to do in FY '27. You would have seen the collaboration with Law Roach and also Jose talked about The Heart and how we're supporting The Heart and linking that with all of our marketing spend. So there are product moments, but there are also brand consideration moments that we'll be investing in. And actually, what we've seen from some of the even recent results in our first choice consideration metrics, particularly in the U.K., is that they're improving. So what we're doing here is working, and we'll continue on that path.

Jose Antonio Calamonte: On the new consumers, I think that -- let me start by saying, I think it's important to understand that we have changed significantly the equation of how do we attract new consumers. We used to attract new consumers based on promotion and performance marketing. We're attracting our new consumers based on newness and excitement. And -- it is great to see that more new consumers are coming, and that's why I said that clearly shows that the new formula is resonating with them. As a result, these consumers are buying more full price. The fact that they buy more full-price products increases, obviously, their value as consumers. This value is being reinforced by the fact that we're seeing that they're buying more categories. One of the things we were seeing these more promotional consumers, they tend to buy one category that was in promotion, normally pretty much focused towards branded product and leads. And now they're coming buying this category and then they buy not this category, one category and then another category. And that obviously, we know that consumers that buy more than one category are more resilient and tend to last much longer with ASOS. And if you want, the last thing was this increase of frequency, what we are seeing in the new consumers, we're measuring how many of them repeat after 90 days. We know that when a consumer repeats after 90 days, the likelihood that this consumer is going to become a more regular consumer is significantly higher. We see that this repeat rate is higher than before. Obviously, it's still very early because we need a full year to understand what is going to be the full impact. But when you put it all together, it looks like this is a much more valuable cohort of new consumers than what we used to do before. And obviously, that is very reinforcing.

Katie Cousins: Just firstly, on Fashion Frontier, and you mentioned those hundreds of hours of manual hours that are going to be saved from these agents. Are those pure profit savings? Or actually are they hours that you can redistribute elsewhere in the company? And then the second one on the shopping experience. Just kind of want your sense of where you're at versus some of your competitors and peers in terms of that outfit the social, the likes of Uniqlo and stuff I know they do have a social element to the shopping. So are you playing catch-up? Are you all racing to the same goal? Just any thoughts on that really.

Aaron Izzard: Thank you, Katie. Look, when we think about this efficiency that we're driving for Fashion Frontier and any activity that we're doing, we again just think about that model of generating efficiency to be able to reinvest back into the customer. And the same applies with any hours saved. In many cases, the hours that we save from day-to-day work gets reinvested back into the customer, whether it's through different work that these employees are now working on rather than focused on really manual work, they can focus on how we can enhance the customer proposition. So we don't think about this in such a binary fashion as being we save hours and it drops to the bottom of the P&L. This is all about making sure that we've got the right balance between driving savings to reinvest back into growth and driving profitability.

Jose Antonio Calamonte: Yes. When we think about our app and on the social aspect of it or any of them, I think that's why I told you I wanted to take you with me on a journey. This is a little bit getting off the beaten path. Nobody has found the right answer here. So it's difficult to say that anyone is playing catch-up or that we are playing catch-up because I don't think there is anyone who has cracked this problem. I don't feel this is about playing catch-up from ASOS. It's more about really exploring how far this can go. And that means that you are going to see some projects that we try and some are very successful and some are less successful and some we double down and some maybe we don't. And that will be this -- if you want this Test & React kind of logic, it's also going to apply here. What I think there is no question is that this is the direction of travel. I think consumers find that the shopping online experience is overwhelming and that we get through our own research. But I'm sure if you ask your friends or your relatives, you will get pretty much the same type of opinion, and we see that a lot of people are trying to go into this direction. We want to be first, and we are convinced that we have a lot of elements that makes us different. The fact that we are multi-label is very different versus some of the other players. The fact that we're multilabel, but we have a very strong own label and very strong collaborations with some of the best brands in the planet makes us very different to anyone else. So we think that we have a combination that can help us be one of the champions in this journey of winning the new way of buying online.

Phil Clarke: So Richard, then we do George after. . .

Richard Chamberlain: It's Richard Chamberlain from RBC. A couple for me, please. So first one is on France. I wondered if you'd seen any impact on customer demand from the recent disruption there and impacts on consumer confidence. And then I guess the second one, probably one for you, Aaron, is on these timing differences you're talking about in free cash flow. Can you just clarify what they were and which ones will reverse in the coming year? It sounds like there's some tariff refunds that were later coming through. Is that right? And a few other things?

Jose Antonio Calamonte: I'll take France. So yes, sure, Richard. I think France is a very -- what would be the right word, a very -- I don't know if the word is volatile, but it's a market where there are a lot of things happening. So in the EU, we have seen the new legislation on the minimis. In France, we have seen the new legislation on fast fashion. And of course, we have seen all the unrest coming from there. So obviously, that is one of the things that might be behind the fact that France is a little bit behind the other markets. But we also see a good evolution in France. So maybe slower, but we see a good evolution in France. I don't think we can attribute it only to one thing. It's a very complex phenomena where there are many, many things going on. And as I said before, we focus on what we can influence and we cannot influence other things. So we are just making sure that we offer our French consumers the best possible value proposition in product, in shopping experience, in delivery times so that they keep on engaging with ASOS.

Aaron Izzard: Thank you, Richard. So there's probably -- working capital, as you know, can be volatile, seasonal, impacted by a number of things. There's probably 2 things to call out. So one is the tariffs, as you point out. So we received tariff refunds of around $9 million. That was just after year-end in September. So that is a timing benefit that you will reverse into FY '27. The other part of it was a refund returns, refunds timing thing. We saw a benefit probably in FY -- or not probably, we did see a benefit in FY '25 from that, and that was a reversal into FY '26. So I don't anticipate that will generate a timing upside in FY '27. A couple of things to point out on the free cash flow, which I think is more important. So first of all, which is probably masked to some degree is we've extended our payment terms on -- with many suppliers with our improved performance, puts us in a much stronger position, and that creates long term, longer term benefits in our working capital position. But more importantly, as we move into FY '27, I would say the more fundamental components of our free cash flow generation are the improvement in EBITDA, the reduction in interest, which we will experience even absent a refi of GBP 10 million to GBP 15 million, but potentially more with any refi activity. And the other thing to point out, which was occurred in FY '26, which we don't expect to repeat in FY '27 to the same degree is some of those adjusted items. There were restructuring costs in there and also costs relating to the mothballed warehouses that we've since disposed of. So there are a number of items which will improve our cash flow into FY '27 and structurally thereafter, continue to enhance our free cash flow generation.

Georgina Johanan: Georgina Johanan from JP Morgan. Just 2 from me, please. First one, I think you flagged that whilst sort of the focus and the initiatives are on growth, there are still opportunities on gross margin and on cost to serve. So just interested to know, are they kind of all coming from AI initiatives? And if not, maybe you could just -- even if you can't put numbers on it, maybe just some examples to reassure given the still challenging consumer backdrop that there are sort of opportunities still there. And then just thinking about all the sort of exciting stuff that's going on, on the Agentic commerce side, please correct me if I'm wrong, but it feels like a lot of the things you talked about were going to be very focused on kind of the more fashionable customers, the really loyal customers who kind of really love fashion. And presumably, there is still like a relatively high portion of sales that are coming more from people who are just less regular fashion shoppers. And I was just interested to know what AI initiatives you're kind of rolling out and thinking about that are going to be important for those shoppers as the landscape changes. So maybe that's how you're ensuring that your website is surfacing through consumers asking ChatGPT questions or how easy it is for an agent like Muse or Instinct to transact on your site? Just any color on that would be really helpful because obviously, it's still quite early days.

Aaron Izzard: I can take the first one Thank you, Georgina. So as we pointed out, huge benefits in gross margin over the last couple of years, 300 basis points improvement in both the last 2 years. I still expect there to be benefits in gross margin on an underlying basis from the same themes. What we've got this year coming is probably a couple of headwinds that I think will partially offset some of those savings or benefits, should I say. One of them is the full year of the tariffs impact. There's also inbound and outbound fuel surcharges, again, I think, as you alluded to. But I think going forward, again, we'll share more when we come to the Capital Markets event, we still see headroom in gross margin. From a cost to serve perspective, I see the same -- well, the same principles and similar themes to what we've seen in FY '26. There is more opportunity for us to drive cost to serve efficiencies and reinvest back into growth initiatives such as marketing. Some of the specifics there are, of course, as pointed out on the Warehouse section previously, we're investing in further automation in the inbound lanes in the warehouses. We expect that to give us a benefit. There are further efficiencies within our distribution network that we've already negotiated or changes that we've made without impacting customer proposition. In fact, in some cases, as Jose pointed out, enhancing them, such as the 11 P.M. cutoff in NDD. Our rationalization of our technology, SaaS, there's still opportunities there. And many of these benefits that we've seen in FY '26, we also see an annualization benefit into FY '27, such as the reduction in headcount of 17%. So there are a number of these efficiencies that we'll continue to work through. And the model continues, keep driving the efficiencies, keep enhancing our gross margin through the commercial operating model, although not so fruitful in FY '26 on the specific line and reinvest back into growth. That's our model, and that's what we'll continue.

Jose Antonio Calamonte: Yes. Just to build on what Aaron said, one single thing. I think there is still room to improve our full price sell-through. The fact that through agentic and with initiatives like Missed Product Delivery Promise, we can bring the merchandise faster and have it here more on time, that will give us. So whether this is going to show in fiscal year '27 or during the course of the following years, we will see, but there is still room to improve there. Improving full price sell-through, obviously, is going to improve gross margin. So we see -- I personally am very passionate about the full price sell-through because it really shows our consumers are buying what they love, not something just because it's cheap. On the agentic commerce, you're right. I have been talking mainly about -- I can be very passionate. So I've been talking mainly about the part that is, if you want a little bit of newer because what we see is that the capacity to ultra personalize to consumers. What is going to unlock is this capacity to help consumers navigate the complexity of online. Online is you have access to everything you want, and that's why it can become overwhelming. Suddenly, we can offer to you what you really want or what we have, suddenly it becomes better for you. That is going to be helpful for everybody, not just for the fashion loving. Actually, it's quite interesting. I think that the people that are really going to enjoy that more is not the true fashionistas. Normally the true fashionistas know exactly what they want. The people that are really going to love it is the people that like fashion, but they are not true fashionistas. And they say, "How do I do that?" Like typical question from consumer. Kind of like this dress, but how do you wear it? This is where ultra personalization is going to make a massive difference. This is where being able to surface to consumers who have an interest in fashion, but they are not true fashionistas, I think is going to make the shopping experience online a superior shopping experience versus offline because in offline, you can never do it at this level of personalization. So I truly believe that, that is going to have an impact also on the type of consumers. We are not talking here about the consumer that is looking for a pair of white socks that is very cheap. That is a different story. Probably for this consumer, the current shopping experience is very good. It will still be available for this consumer, but it's not the one that's going to benefit so much from it. Sorry, very long answer.

Phil Clarke: We'll come to the front here. Sorry, I don't know what your name is.

Nicholas Barker: It's Nick Barker from BNP Paribas. Just one on the -- anything to say about the age or customer demographic of the latest cohort of consumers? And then sorry to ask one on the cyber incident, but things seem quite temporary, but is there any risk of long-term damage to the brand?

Jose Antonio Calamonte: So thank you for your question. So on the age of the new consumers, it's pretty much similar to the age of the consumers we have. We're not seeing a big change there. So our average age in the late 20s, 29, 30. So it's not moving the needle in that sense. So it's pretty much very similar. What I said before is like the behavior is very different. These are consumers that are coming to ASOS not to buy a cheap pair of sneakers. These are consumers that are coming to ASOS to buy fashion at full price. And I think a good example is our collab with adidas, where every time there is a new drop, it sells out in a matter of minutes. And there are items, and I have seen someone wearing one of the items this morning. It sold out 4,000 units in 3 minutes, and it was not cheap. It was more than GBP 100 per unit. So that gives you the idea of how these new consumers are behaving. For instance, this adidas collab, I think in the U.S. generated 50% of the people who bought it were new consumers. So it's a very different new consumer from a behavioral point of view. On the cyber incident, obviously, we can measure what has happened. It's very difficult to measure what is going to happen. So what has happened, as we said, is like we think -- and it's difficult to estimate exactly what is the impact, but we thought you guys would be interested, and that's why we made the effort to tell. I think it's between 2% and 4% of our sales. Is it going to last? What gives us confidence that this is going to be temporary is that the amount of consumers continues growing. And as we have seen before, this is the best leading indicator of what is going to happen with sales. And our total sales have remained resilient. So we have the confidence that this is going to be temporary and things will go back to normal.

Phil Clarke: We'll do Yash and then we do Anubhav.

Yashraj Rajani: Yashraj Rajani, UBS. So I have 2, please. So the first one is on your distribution infrastructure. I appreciate we've rationalized 2 fulfillment centers this year. So after having done that, where is your current capacity utilization? And how many years do you think you have until probably CapEx as a percentage of sales needs to step up again to build some of that capacity. So that's the first one. And the second one, Jose, is just on the long-term plan. You said with Agentic AI. I apologize if this is an unfair question, but relative to some of your competitors in U.K. and Europe, right, if we do look at them, maybe they have higher number of customers, higher purchasing frequency and potentially higher loyalty program penetration relative to you. So how do you think about taking ASOS in the direction where you are differentiated and you can potentially gain market share from them in the growing online channel?

Aaron Izzard: So from an infrastructure perspective, we're really happy with the longevity of the infrastructure that we have in place today. There is -- we're around 65% to 70% capacity from an order throughput perspective. There is significant headroom for us to be able to grow. In terms of how many years, I mean, the automation equipment has got a long useful life left. It will be a nice problem for us to have when we meet that capacity. But the investment I expect to put into those warehouses over the coming years with that level of capacity will only be to improve the return on investment and the efficiency of those warehouses. The equipment is good, and we're really happy with the infrastructure that sets us up for growth.

Jose Antonio Calamonte: Yes. On the unfair question, as you said, let me give you a couple of facts here. 74% of our U.K. customers are part of the loyalty program with 0 discounts. So it's very easy to say, I have 100% of our customers, we are giving them 5% back. So we're not giving them 5% back. 74% are in our loyalty program, which I think it speaks loud and clear about how powerful that can be when you give them access to more exciting experiences and not just discounts. But I think that, that AI and that evolution is going to have on shopping experience is not going to necessarily build on the loyalty program on the amount of customers. It's going to build on the capacity to generate this inspirational shopping experience. And I went very fast over it, but I think this inspirational shopping experience, for instance, is going to be built on the concept of outfits. People don't buy -- this is a very generic. And of course, some people buy one item. But normally, people buy one item because they want to combine it with something else. So thinking of outfits becomes critical. And in that sense, the fact that we are a multi-label gives us an advantage because nobody tries to stop to one brand. The fact that we have our own brands and exclusive collapse gives us an advantage because that gives us speed and the capacity to have relevant items. And today, we're saying trend is about more scenic evening dresses. We can say it and we can offer it to our consumers, while some of our competitors need that other brands are providing it to them. So that gives us the capacity to really offer what is relevant on time. And the fact that we have always created our assets, our pictures, thinking of assets generates a capacity that is not that easy to replicate that we are now through AI studio. If you want -- we're leveraging on this capacity to be able to generate unlimited content still thinking of outfits and not individual items. So I know it's not easy to picture. But when you start putting all these pieces together, I'm convinced that we have a position that is better than a lot of our competitors because they either don't have a powerful own brand or they are not multilabel or they are having always focused on selling one individual item or they don't have a vision of language or -- so they will have to learn that part of the journey we have already learned. So I think that we do have a good position to be one of the champions. We will do Anubhav just behind you there. Yash, Karl will come to you.

Anubhav Malhotra: Anubhav Malhotra from Panmure Liberum. A couple from me, please, if you don't mind. Firstly, on free cash flow, you noted a lot of positives coming through for free cash flow next year, but I just want to understand why you have shied away from giving an absolute range of free cash flow outcomes. And then secondly, on flexible fulfillment, it seems like the take-up has been faster than what you initially planned 2, 3 years back. Can you explain why are brands liking it so much? Why are they taking it up so quickly? And where do you see the future and the limit on flexible fulfillment?

Aaron Izzard: Thank you. Sorry, I didn't catch your name, sorry. Okay. So we've given more components of free cash flow, trying to break it down for you guys so you can really understand what our structural free cash flow looks like going forward. The element in that, which is always slightly unknown, seasonal, volatile with various different things is the working capital. And therefore, what we're trying to do is really anchor on the components that drive our structural free cash flow, and all of those are improving. Yes, we're investing in CapEx next year in the warehouses. But outside of that, our CapEx remains steady. And the vast majority of that is investment in growth in tech development spend. We're reducing our interest and leases costs, and we're improving our EBITDA. So the way we think about this and the way I guess I would urge you guys to think about not just next year, but the outer years is our structural free cash flow and the components of it that are definitely improving year-on-year, and we expect to see that continue into outer years.

Jose Antonio Calamonte: On the flexible models, I think that why is it growing now faster? I think it's reasons. Number one is like we have learned to do it better. So that obviously has created more confidence on certain partners, and that has helped to attract more brands. And recently, we have announced that, for instance, Nike starting to do one of these flexible models with us, which is one of the big brands and was not doing it yet. So that is clearly. But the second one is that we're offering more possibilities to our partners. We started with what we call partner fulfills that is very much a drop ship type of model. We added like 16, 18 months ago, whatever, ASOS Fulfillment Services where the partners place the stock in our houses and we do the whole delivery. That makes it more attractive because certain partners prefer to do delivery themselves, certain partners prefer that we do it for them. And the fact that we have opened the -- if you want, the range of opportunities and models that has clearly made it more attractive. And we see that some partners are pivoting from one to another because they prefer or they go directly to another. So I think that's good, and that's what explains the fast growth. In terms of the size, I think we're in a good place. We don't have a target. We're in a good place. I think probably we will get more growth from that because -- but it's going to be a growth that is always going to be driven by what the consumers want. We are customer-centric in everything we do. So if our consumers are asking us more of that, this is what we are going to do and where we will pivot. Some of these models are working very well because they are very flexible. And I think, for instance, ASOS Fulfillment Services is a good example. The partners that have joined that service are really seeing a very interesting growth because it's probably putting together the best of both worlds. So probably, we will see more growth coming from these formulas. And we are fine because as I told you, we are customer-centric. So if this is what the customers want, we will provide them with that.

Phil Clarke: Karl, do you want to finish this off with the Q&A?

Karl Burns: Yes, sure. It's Karl Burns from Berenberg. Just a few ones. I think at the start, you said that new customers are more profitable, particularly in Q4. Is that before or after customer acquisition costs? And then just on customer acquisition costs, obviously, you've stepped up marketing. How have they moved when you have stepped up marketing? And have you seen any impact from AI overviews? I think a number of Internet companies have been saying that AI overviews has resulted in a drop in search traffic.

Jose Antonio Calamonte: What do you mean with AI overviews, I'm not sure.

Karl Burns: The AI overview on the search bar. For Google AI overview.

Jose Antonio Calamonte: Okay.

Karl Burns: Yes. A few companies, I think Reddit in particular, was basically saying that, that's resulted in a drop in search traffic and it's pushed up their customer acquisition costs. So I just wondered if you've seen anything similar.

Aaron Izzard: I'll take that first bit. So our new customers are more profitable, ultimately, because we're -- our retention of those new customers is better. So when you combine the fact that our -- the effectiveness of our spend and our cost per acquisition in the first place are improving and the profitability on their first order is improving because of our order economics and the fact that we're retaining more, that's helping us to retain these new customers. But I want to point out, it's not just our marketing spend, which is driving these new customers. It's a combination of all these factors that we're putting in front of the consumer; better product, more assortment, better quality, better experiences and more immersive experiences. When you capture all these, of course, with then a loyalty program that is retaining them and an improved CRM engine where we're managing the life cycle and communicating in such a way which is engaging these customers, you put all that together with the fact that we're increasing our marketing spend, and that as a package is helping us to improve our new customer acquisition.

Jose Antonio Calamonte: On marketing efficiency, if you want, overall, let me take a step back, and I will then get to your question. We have seen an improvement in our marketing efficiency. That's why we have invested more. So as I said, our -- if you want our tenant is always we only invest in marketing when it's profitable. We don't invest in marketing if it's not profitable. So if we're investing more is because we have found ways to make our marketing activity overall more profitable. There are some AI features, let me call it like that, that might have a negative impact. There are also some AI features that are having a positive impact. The fact that we are using AI to create everything of our campaigns or the fact that we are leveraging on AI tools to connect the right consumer with the right item. And if I can take you to a completely different place that is not necessarily AI, I think that also a very interesting tool for us has been what we -- what I shared before, The Heart, where we really make sure we connect our product marketing with the way we buy. I know I'm connecting a little bit of too many dots here, but bear with me for a second. In my opinion, in this market, it's very important what you sell, but it's very important what you don't sell. Let me explain what I mean. The missed opportunity that was mentioned in one of the charts, being aware of the opportunities where we are not selling and we could have sold more is a fantastic way to grow and being able to pivot our investment from the nonprofitable or non-attractive items to attractive items is very critical. And this is what The Heart is helping us to do. We are pivoting investment to make sure that the investment is in the places where the eyes of the consumers are going to be and where they're going to buy. That is obviously pushing the efficiency of our marketing. So I think that overall, we are seeing improvements. Yes, there might be some features that are reducing the efficiency of marketing. But overall, we are happy.

Phil Clarke: Guys, we're going to have to wrap up there. Hopefully, that's covered a lot of topics. Hannah and I, obviously, from IR are available for any follow-ups everyone has. But thank you for joining. Thank you, Aaron and Jose, for the presentation.

Jose Antonio Calamonte: Thank you so much, everyone, and looking forward to seeing you in this Capital Markets event, sorry, that -- where we will walk you through more details on our view of the future of ASOS. So have a great day. Thank you.