ASOS supply chain issues to last until the new year as growth slows
ASOS has said global supply chain issues, which have led to spiralling shipping costs, are set to last throughout the first half of its financial year, which ends in February.
The online fashion giant, which this morning announced the immediate departure of its CEO Nick Beighton, revealed a slow-down in sales growth in the year to 31 August 2021. Sales were up 22% in the year to £3.9 billion while adjusted pre-tax profit rose 36% to £193.6 million. UK sales were up 36%.
However ASOS warned that its pre-tax profits for the coming financial year would be lower due to the supply chain crisis, which has resulted the supply of some of its partner brands drying up, rocketing shipping costs, Brexit issues and an increase in salaries. On an adjusted basis, pre-tax profit is expected to fall from £193.6 million to somewhere between £110 million and £140 million, ASOS. Sales growth is expected to be between 10% and 15%.
As well as the supply chain issues, ASOS expects returns, which had fallen during the Covid era, to return to normal levels. ASOS said the benefit of fewer clothes being returned during the pandemic had benefited the business to the tune of £67.3 million.
Mat Dunn, who was CFO at ASOS, is now stepping up to COO and will run the business on an interim basis until Beighton's successor is appointed. He said of the results: “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.
“In the last two years, we have transformed ASOS with investment in infrastructure and the customer offer; we have generated strong revenue growth and free cash flow and improved structural profitability."
The business also set out its plan to increase sales to £7 billion within the next three to four years and cited this as the reason for Beighton's departure saying it was the "right time for him to step down" as it embarked on this next period of growth.
To achieve this growth, ASOS said it would require Capex costs of around £200 million to £250 million. It plans to double the size of its UK and US business, grow sales of its own brand to £1 billion and strengthen the ASOS platform by offering "partner fulfilment", targeting around 5% of Gross Merchandise Value for this service.
Many other online retail giants from Next to Zalando offer fulfilment services for partner brands though a marketplace model. As part of the boardroom shake-up, due to Beighton's departure, a former member of the Zalando board and current chair of Danish online marketplace Miinto, Jørgen Lindemann, has joined the ASOS board.
Former senior independent director and a veteran of Marks & Spencer, Ian Dyson, will take over the role of non-executive chairman from Adam Crozier who is relinquishing the ASOS chairmanship to take up the same role at BT.
One of Dyson's immediate priorities will be to appoint a successor for Beighton, who will make himself available until the end of the year to offer advice if needed but will leave the business with immediate effect.
Dyson said: “ASOS is a great business with a strong brand and a talented team, and I am proud to be taking over as Chair. My key priorities will be recruiting a new CEO to take the business forward, at the same time working with Mat Dunn and the rest of the executive team to deliver our compelling strategic plan. I am pleased to welcome Jørgen Lindemann to the team; he brings deep experience of international digitally-led businesses, which will complement the existing Board expertise.”
Shares in ASOS dropped more than 7% in early trading to 2,576p on the back of the announcements.