Asos boss resigns as firm warns of plunging profits
ASOS shares plummeted after announcing its boss was leaving and warning that rising costs will hit profits.
In a bleak update to the stock market, the online fashion group said Nick Beighton (pictured below) has left after 12 years, including six as chief executive.
His sudden departure – with no replacement lined up – came alongside a warning that profits would fall by up to two-fifths this year due to higher shipping costs and rising wages for drivers and warehouse staff.
The company also said senior independent director Ian Dyson – a veteran of Marks & Spencer and Punch Taverns – will take over as chairman when Adam Crozier joins BT next month.
Asos shares fell 13.4pc, or 373p, to 2408p yesterday, taking losses since March to more than 50pc.
Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: ‘The Asos bubble has burst.’
Shares in rivals Boohoo and In The Style have also fallen by half since the start of the year.
Asos has previously warned that the cost of shipping has risen ten-fold, and in recent months it has been forced to raise hourly wages for warehouse staff from £9.65 to between £12 and £13. Profits will be between £110m and £140m in the year to August 2022, it said, compared to analysts’ forecasts of £186m.
Beighton’s exit came after he told the board he was unable to commit to staying to lead its expansion abroad, which is expected to take at least five years.
The board said a search for a full-time chief executive is under way, but dayto-day running of the business will be handed to finance boss Mat Dunn.
The firm’s troubles came despite the pandemic helping to boost profits by 36pc to £193.6m in the year to August, thanks to a 22pc increase in sales to £3.9bn.
Sales increased strongly in the UK and the US, by 29pc and 32pc respectively, while Europe acted as a drag with sales growing by just 4pc. But the problems in global supply chains mean that overall sales growth will drop to around 5pc in the six months to February, as customers are faced with gaps in stock availability.
A ‘Covid-19 benefit’ of £67.3m will fall away, further hitting profits, because more clothes are being returned by customers. Comfy clothes for home, which were popular during the pandemic, are less likely to be returned than more formal clothes. Asos tried to mitigate the share price rout by promising investors it would grow sales to £7bn within four years thanks to its expansion across Europe and the US. But critics said the target lacked credibility. The company will invest between £200m and £250m per year in its expansion in the US and Europe, as well as increase advertising spending in new markets by £40m. This year it acquired former Arcadia brands Topshop, Miss Selfridge and HIIT, and signed a deal with Nordstrom, a major US retailer.
Analysts at Peel Hunt said: ‘Confidence in the future centres squarely on Asos’s ability to replicate the UK’s success across international markets.’
Asos has also announced it will follow in Next’s footsteps by offering its brand partners the chance to piggy back on its warehouses and logistics network.
Dunn said: ‘While our performance in the next 12 months is likely to be constrained by demand volatility and global supply chain and cost pressures, we are confident in our ability to capture the sizeable opportunities ahead.’