Bleak outlook: Asos ‘not keeping up with fast fashion rivals’ after supply chain pressures
Online retailer Asos’ share price took a bruising yesterday amid a “massive warning shot across the bows of other online retailers.”
The fashion firm’s CEO Nick Beighton made a shock resignation yesterday after six years in the role as shares were down 50 per cent on the year.
Shares fell by 14 per cent on Monday despite the retailer reporting bumper financial results for the year ended August 2021, thanks to lockdown shoppers.
The retailer warned next year’s profits would take a hit from “global supply chain and cost pressures,” triggering shares to dive.
Analysts said Asos had struggled to keep up with its fast fashion peers after experiencing warehouse and availability issues.
The scale of problems at Asos appear to have been “underestimated,” according to Russ Mould, investment director at AJ Bell.
The analyst dubbed the retailer’s near-term outlook as “somewhat bleak,” as sales growth is expected to slow “quite dramatically”.
Supply chain issues don’t look set to disappear anytime soon, meaning profit margins will be squeezed.
The hunt for Beighton’s replacement will concern finding a globally experienced, growth focused business leader, CityA.M. understands.
“Cost inflation is a problem affecting multiple industries, so not something that can be blamed on Nick Beighton. But he appears to have lost his position in the company due to a struggle to sustain momentum in the business,” Mould added.
Fast fashion rival Boohoo recently reported a hit to profitability due to £26m of freight and logistics cost inflation relating to Covid during the first half of the year.
Brett Jacobson, CEO at Mediaworks digital marketing agency, said Asos was not alone in “feeling the severe pinch” of global supply chain issues.
“This is a massive warning shot across the bows of other online retailers,” he added. “Competition for eyeballs online has been accelerated exponentially by the pandemic.”
Asos reported that gross profit jumped 15 per cent to hit £1.8bn while the company’s customer base grew by 13 per cent to 26.4m.
It predicted that profit before tax will fall from £177m to between £110m and £140m as the government winds down Covid relief for companies.
However, Jelena Sokolova, senior equity analyst at Morningstar said the “initial shockwaves” following Beighton’s departure would be a “short-term blip”.
She added: “We still see shares as attractive and don’t expect a significant change to our overall value forecast. Asos remains a huge player in online shopping with plans to up its competitive game into 2022.”