[ad_1]
Asos, the online clothes retailer, has “continued to improve velocity of newness” and “velocity of . . . social media activity”. Just not the velocity of its stock deliveries. And for a purveyor of “fast fashion”, that is a problem. I don’t know about you, but if I were on Instagram and saw Asos’s new paradise print festival shirt in neon snake print with a collar designed to expose my neck tattoo, I’d want it tomorrow — not next week — or not at all.
It seems that others feel the same way: slow implementation of new systems at Asos’s European and US warehouses has held back stock and customer orders — and resulted in a third profit or revenue warning in the space of seven months. In March, the group said sales would be hit by delayed shipments in the US and tough markets in Europe. In December, it said its operating margin would halve from 4 to 2 per cent due to heavy discounting in promotional markets. On Thursday, it said unavailable stock and higher costs would cut profit again, from a forecast £55m before tax in 2019 to £30m-£35m.
This is not the sort of “newness” investors want to see. As Shore Capital complained: “Initially sales guidance was for [about] 25 per cent growth in FY2019 — that has now been halved in the space of six months.” Nor is the “newness” of Asos’s excuses proving a good look: it has now added third-party operational failings to the pricing and marketing challenges it admitted to late last year. As AJ Bell analysts noted: “You also need the ability to manage the day-to-day business including flawless execution of warehouse operations, having enough stock, and maintaining superior customer service”. There is no point offering a must-have shirt, if customers can’t have it.
Shore Capital called Asos’s warehouse problems “self-inflicted”. Liberum asked how — after £700m of investment in four years and £1.5bn of additional sales — “profits are now £20m lower than in 2015.”
To be fair to Asos, it always said that international expansion would not be without red ink and some bumps along the way. This year’s lower profit will come after £47m of transition costs — moving US fulfilment from Barnsley to Atlanta is not cheap. Once it is working, though, sales growth should recover. In a fully stocked UK, quarterly sales were up 16 per cent and analysts still expect group profit to double in FY2020 and rise by another 50 per cent in FY2021.
But, like the man with the “No Regerts” tattoo peeking from under his hairline, Asos boss Nick Beighton cannot afford many more mistakes. Customers may not forgive further ordering problems — and he would have little scope to win them back with promotions having already promised to invest more in margin-sensitive price cuts in Europe. Shareholders may not forgive further revisions to guidance — in fact, Mr Beighton is already being told by Shore Capital that “management need to rebuild credibility in their financial guidance”.
Can Asos shares, which fell 20 per cent on this latest warning and are now down 55 per cent in 12 months, recover? And would I really buy a paradise print festival shirt in neon snake print? Possibly. But I wouldn’t stick my neck out.
matthew.vincent@ft.com
[ad_2]
READ SOURCE
