The chief executive of Asos, Nick Beighton, is departing the U.K.-based online fashion retailer in a shock move as the company issued a profit warning, citing supply chain issues and rising costs combined with a slowdown in its growth. Asos is facing “notable cost headwinds” from inbound freight fees, wage inflation, outbound delivery costs and Brexit-related duties.
Beighton, who has been at the company for 12 years, the past six as CEO, stood down with immediate effect but will stay with the company until the end of the year. The current chief financial officer, Mat Dunn, will take on the additional role of chief operating officer and lead the business on a daily basis, while the finance director, Katy Mecklenburgh, becomes interim CFO.
The group, which saw sales soar last year during Covid lockdowns, said it now expects adjusted pre-tax profit in the 2022 fiscal year to fall to between £110 million (€129.6m-$150m) and £140 million (€165m-$191m), well below consensus forecasts of £193 million (€227.5m-$263m).
Asos said 2022 sales growth is expected to be around 10-15 percent, with first-half revenue growth slowing to mid-single digits, reflecting tougher comparables in the first half, particularly in the U.K., and industry-wide supply chain pressures.
It will also be hit by the loss of a £67.3 million (€79m-$99m) “Covid-19 related benefit,” as shoppers were less inclined to return clothes during lockdowns.
Despite the downgrade, the retailer set an annual revenue target of £7 billlion (€8.25bn-$9.55bn) with an Ebit margin of 4 percent within the next three to four years. It plans to achieve this by doubling the size of the combined U.S. and Europe businesses and adding at least £1 billion (€1.18bn-$1.36bn) to yearly own-brand sales.
News of Beighton’s exit came alongside results for the year to Aug. 31, 2021 which showed adjusted pre-tax profit up by 36 percent to £193.6 million (€228m-$264m) on revenues of £3.9 billion (€4.6bn-$5.32bn), up a fifth on the previous year. The reported pre-tax profit was 25 percent higher at £177.1m (€208m-$241m).
The company hailed “exceptional” sales growth of 36 percent in the U.K. to £1.65 billion (€1.94bn-$2.25bn), and growth of 21 percent in the U.S. Sales in the EU and rest of world were up 15 percent and 6 percent, respectively.
Russ Mould, investment director at AJ Bell, said the company had found it hard to keep up with the fast-fashion movement in recent years, facing criticism for failing to turn around new product designs quickly, along with warehouse problems and poor stock availability.
“Customers have so much choice with where they buy clothes and competition continues to grow, with the likes of China’s Shein making a big mark on the U.K. Players must either excel in one or more categories of price, product range and quality, and Asos will need to do something extra to make it stand out from the crowd,” he said.
The brokerage Peel Hunt said that while Beighton’s departure may not have been expected this week, “it had felt fairly imminent.”
“Following a series of missteps in 2018/19, Asos strengthened the main board and set about recruiting a strong leadership team, cementing the transition from founder-led business and reducing key-man risk.” It added that hitting £7 billion in revenues is “entirely dependent on the successful international expansion”.
“We think Asos is extremely well placed to succeed, though expect the shares to struggle to deliver progress ahead of the capital markets day and appointment of a new CEO,” it wrote. Asos was due to hold its capital markets day on Oct. 14 but the meeting with investors has been postponed to Nov. 10.
“Clearly, Asos has some impressive internal talent … but we feel this is an appropriate juncture to bring in another external appointment to shape the U.S. and wider international opportunity,” Peel Hunt added.
Asos’ share price has been declining in recent months, like that of Zalando, as the online fashion business has been losing steam. The new about Beighton’s departure sent it down further by more than 13 percent, leading to a loss of 56 percent since the beginning of July.
There is no doubt that Beighton has done a good job. He said in a statement: “When I joined, there were fewer than 200 people and we had annual sales of around £220m. I leave a business reporting turnover of almost £4bn, with more than 3,000 fantastic Asos-ers delivering for 26 million customers in 200 markets around the world.”
