Asos boss exits as firm warns profits to plunge
Asos has announced its chief executive is leaving with immediate effect as the online fashion giant warned that rising costs are set to hit its profits.
Nick Beighton is stepping down after six years in the role and the day-to-day running of the firm will be taken over by Asos’ finance chief.
Asos also cautioned that next year’s profits could fall by as much as 40%.
The company had benefited from lower rates of people returning clothing during Covid-19 lockdowns.
Asos said this had resulted in £67.3m of cost savings, but it said that the levels of returns were now normalising.
Profits are also likely to be affected by increased freight costs, Brexit duty, outbound delivery costs and higher wages.
While adjusted pre-tax profit rose 36% to £193.6m for the 12 months to 31 August, Asos now expects this figure to fall to between £110m and £140m next year.
Asos’s share price tumbled by 15% in early trading before regaining a little ground. Its share price is down 42% since the beginning of 2021.
The warning of lower future profits overshadowed its results for the year to 31 August, which showed sales rose 22% to £3.9bn.
Asos said it had attracted another 1.4 million customers over the past year as people turned to online shopping amid lockdowns.
Throughout the period leisurewear became more popular, and this added to profits as it is less likely to be returned than more formal clothes.
Asos said returns were already normalising, adding that the new customers it attracted in the last year were more likely to send clothes back.
“Asos has enjoyed a huge boost to trading over lockdowns, albeit for less-lucrative casual wear as its core demographic was stuck at home,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
“A reluctance to leave the house meant return rates were lower, resulting in XL margins. However, the tailwinds are easing and the Asos bubble has burst.”
Asos also set out changes at the top of the business to “deliver next phase of global growth”.
It said Mr Beighton “and the board have agreed that now is the right time for him to step down” as chief executive. A search for his replacement is under way but in the meantime chief financial officer Mat Dunn will oversee the day-to-day running of the business.
The company’s chairman, Adam Crozier – who will also be leaving Asos shortly to become chairman of BT – said the firm had a new five-year strategy and Mr Beighton had not wanted to stay for at least half of that so it was better to make the change now.
“Asos’s management and board have spent considerable time over recent months developing and validating a clear strategic plan to accelerate international growth, building on Asos’s undoubted strength in the UK,” he said.
“Key to that is ensuring that we have the right leadership in place for the next phase, and the changes we are announcing today are designed to ensure we deliver against our clear strategic intent.”
Asos has been one of the big winners in this pandemic as people turned to online shopping during lockdowns. But it’s facing the same supply chain problems as everyone else in retail including a host of increasing costs – from pay for warehouse workers to the shipping of containers of clothes from the far east, which is likely to put a huge dent in its profits for next year.
Getting the right products at the right time is also challenging. And shoppers are now settling back into to old habits when it comes to returns.
Younger online shoppers often order multiple products and send back those they don’t want. But last year it saw fewer returns as its customers switched to less fitted items like leggings and hoodies.
But those charges are now starting to normalise along with overall sales. Asos has outlined ambitious plans for expansion over the next three years but that will be without its chief executive Nick Beighton who’s leaving with immediate effect – a surprise announcement after 12 years with the business.
Richard Lim, chief executive of Retail Economics said Mr Beighton’s departure had come as “huge surprise” and Asos was “losing someone that has been instrumental to its success over the last decade”.
“The share price has been under recent pressure reflecting the challenges of delivering stellar levels of growth in a more hostile environment and tough comparisons from last year.
“Supply chain disruptions, fierce competitor dynamics and an intense focus on sustainability have created a more challenging outlook for the business over the coming years and seemingly resulted in a big boardroom shakeup.”
Mr Beighton, who has been with Asos for 12 years in total, said in a statement he had enjoyed “every moment” of his time at the firm.
He said when he joined Asos had fewer than 200 people and sales of £220m, turnover was now almost £4bn selling to 26 million customers in 200 countries.