Asos is to write off more than £100m of stock and cut costs after diving into the red after its annual sales growth almost halted as shoppers hit by the cost of living crisis reined in spending on fashion.

The online fashion retailer said it had agreed a £650m banking facility to give it “financial flexibility” and was aiming to rearrange its operations by cutting costs, improving management of stock and “refreshing the culture” of the business.

It revealed that sales had risen only 1% to £3.94bn in the year to 21 August when it dropped to a £32m pre-tax loss from a £177m profit a year before. The group also said it had built up almost £153m of net debts compared with the year before when it held £200m of net cash.

Shares in the business slid more than 1% in morning trading after the announcement on Wednesday. The fall follows a plunge in Asos shares on Monday after it confirmed it was in talks with lenders over changing the terms of a £350m borrowing facility.

José Antonio Ramos Calamonte, the new chief executive of Asos, said the business had become too complex, allowed costs to rise too much and become “overstretched globally” so that it lacked scale in US, France and Germany.

He also said the group had become too reliant on discounting to attract shoppers as it had not invested enough in building the awareness of its brand or developing new products.

The disappointing sales growth came despite sales at the group’s new Topshop brand more than doubling.

Asos will now buy its stock more frequently and closer to the time it will go on sale in an effort to ensure it has the right fashions.

Calamonte said the annual results were “resilient” but Asos could achieve “far more” and the retailer would “work resolutely to emerge from these turbulent times as a more resilient and agile business”.

He said: “Today, I have set out a clear change agenda to strengthen Asos over the next 12 months and reorient our business towards the future. This includes a number of decisive, short-term operational measures to simplify the business, alongside steps to unlock longer-term sustainable growth by improving our speed to market, reinforcing our focus on fashion, strengthening our top team and leveraging data and digital developments to better engage customers.”

Asos said sales in the second half of its financial year had been worse than expected as shoppers reined in spending because of the cost of living crisis and also returned more items as they bought more fitted fashions than during the pandemic lockdowns when stretchy casualwear was popular.

Commenting on the news, Melissa Minkow, Director, Retail Strategy at digital consultancy CI&T said: “Asos’ slowing sales and £9.8 million yearly loss are less of a reflection on the brand and more of a reflection on the state of the industry overall at the moment. It’s unrealistic to expect impressive numbers when consumers’ finances are so hard-pressed, especially when its younger customer base is being particularly affected by the cost-of-living crisis.

“Additionally, the space ASOS plays in has become extremely competitive, and now that consumers have significantly less money available for fashion purchases, the heightened competition here is also an issue.

“With its share price already dropping 11% earlier this week amid plans to restructure its finances, the current crisis is placing the retailer in a precarious position as it balances trying to offset the impact of inflation, with keeping prices reasonable – all while competing for an even smaller pool of consumer spend.”