So much for the idea that lockdown shopping habits had permanently propelled the profits of online specialists into a new stratosphere. Asos, after a knockout year of £194m of pre-exceptional profits, says it will fall back to £110m-£140m next time, several rungs below City forecasts.
Nick Beighton, the chief executive, is out. And the share price, down 13% to £24.08 on Monday, stands at less than half its level at the start of this year, which was a moment when Asos had seemingly demonstrated the triumph of the online brigade by scooping up the remnants of Sir Philip Green’s empire.
But there’s also something familiar in this story for long-term Asos watchers: every time the share price hits £60, it halves within 12 months. It’s happened three times now. The first was in 2014 when the worry was profit margins. Then, in 2018, the problem was teething troubles with new warehouses in Atlanta and Berlin. Now, if one allows a small numerical fudge (the peak this March was £59.95), the curse has struck again.
The latest false dawn contains more than one ingredient but the biggest is probably disappointment overseas. For all the capital invested in the EU and the US, “the world’s leading fashion destination for twentysomethings”, as Asos describes itself, remains formidable only on its home patch. Last year’s rate of revenue growth in the UK (36%) easily outstripped that for the younger markets of the EU (18%) and the US (15%).
Beighton’s exit looks related. When a company says it wants to become a “truly” global retailer, you know it thinks it’s lacking a few vital cogs. Highly rated German group Zalando is setting the pace in the EU and Asos has not replicated its UK marketing buzz in the US. Note the recruitment of an ex-Zalando non-exec, Jørgen Lindemann, for the same boardroom role at Asos. It appears an admission that lessons have to be learned from outside.
In the circumstances, a boardroom shake-up makes sense but Asos suddenly looks a more complicated story than ever. The company still has to prove that Topshop, Topman and Miss Selfridge can enjoy profitable second lives online. Alongside the international rejig, it is also trying to develop a third-party fulfilment platform operation, where Next is making the running in the UK. That’s a long list of big projects, and they will not be overseen by chairman Adam Crozier, who is off to BT at a bad moment.
Asos remains an impressive creation, but a frustrating one. The current share price, remarkably, was first seen in 2011. A decade later, the potential pot of gold for global success looks bigger than ever, but execution is the tricky bit. Asos never makes it look easy.
No easy fix for Treasury and Kwasi Kwarteng’s bust-up
Despite Downing Street’s attempts to calm tensions, the great bust-up between the Treasury and Kwasi Kwarteng, the business secretary, over the energy crisis is unlikely to be resolved quickly. Prepare for flare-ups through the winter.
From the point of view of the Treasury, the sheer size of the “foundation” industries that would like support to combat the energy price hike must look daunting. Under the banner of the Energy Intensive Users’ Group, the collection covers steel, chemicals, fertilisers, paper, glass, cement, lime, ceramics and industrial gases. That’s quite a line-up. The trade body says its members support 200,000 jobs in the UK directly and 800,000 jobs indirectly.
That’s big enough to demand attention, but where’s a hard-pressed chancellor, gamely trying to stick to his conference pitch that “piling up debt is immoral”, supposed to draw the line?
One suspects Rishi Sunak will give ground eventually – and steel probably has the strongest claim now that Kwarteng has found a new sticking-plaster solution for CF Fertilisers to secure carbon dioxide suppliers. But the biggest imponderable will be the duration of wider support. Market prices indicate energy will be expensive until next spring. There is no easy fix – certainly not a cheap one.
Bank’s language sounds like warming up for a rate rise
Andrew Bailey, governor of the Bank of England, is “concerned” about inflation being above target. Fellow rate-setter Michael Saunders thinks it is “appropriate” that financial markets have moved to price in a rise in interest rates “significantly earlier” than previously.
The language, as ever, is loose enough to allow all possible outcomes when the Bank’s monetary policy committee meets in November and December. But this already looks like a warming-up exercise. The good news – for borrowers – is that any move from 0.1% to 0.25% cannot be called dramatic. But 2022 suddenly looks interesting.