On the face of it, ASOS parting company with its CEO Nick Beighton following the publication of a set of creditable results and after him having marshalled the business safely through Covid (during which time it acquired its long-time rival Topshop), makes about as much sense as Britain's new tennis star Emma Raducanu ditching her coach after her historic US Open win.
Why? And why right now, when it's also losing its chairman? Normally when CEOs throw in the towel because they feel it's the "right time to move on", they stick around for a handover period or at least until a successor is found. But Beighton is leaving with "immediate effect" and apparently will be on the end of a phone if needed, but only until the end of this year. It's hard to imagine Mat Dunn, who has been promoted from CFO to COO and who will be taking over the reins on an interim basis, will feel it's appropriate to have Beighton on speed dial.
The official line is that Beighton, who has been CEO for six years and was CFO and COO for six years prior to that, wasn't really up for guiding the business through its next stage of stellar growth. The company, which today revealed sales of £3.9 billion in the year to 31 August, is targeting sales of £7 billion over the next three to four years.
According to Ian Dyson, who is the senior independent director (and veteran of M&S) who is taking over as chairman from the outgoing Adam Crozier, Beighton's "heart wasn't in it" when it came to executing the future vision. "Nick felt that he had to commit to another six years or so for our next strategy and that wasn't something he could commit to," Dyson told journalists.
That all seems fair enough, but it still doesn't explain why he had to go today and, like Raducanu claiming coach Andrew Richardson didn't want to go on the WTA Tour because of all the travel (something debunked by tennis insiders), it feels like a bit of a line.
It seems fair to say Beighton's departure has come as something of a surprise both inside and outside of the business, with one insider telling TheIndustry.fashion that it was a bit of an "undignified" exit for someone of his standing and, also, popularity. He is known to be an affable character who genuinely cares about the business, and has transformed it since he took over from its founder Nick Robertson in 2015 (which was no mean feat as those were big shoes to fill).
Retail analyst Richard Hyman comments: "I think his leaving is surprising and given that ASOS is only now embarking on a search for a successor, it seems to have been a surprise for the company too! His legacy is very positive I think. It’s a bigger, stronger business than it was. It has expanded internationally with success and dealt well with a few international barriers.
"It seems odd that having decided to buy Topshop, he isn’t staying to bed it in. There must be a reason or trigger for his departure," Hyman adds.
Other analysts suggest that, despite the bold vision for a £7 billion turnover, the near term picture doesn't look that great and the company's share performance has not been stellar (shares have lost around 50% of their value in the past 12 months). Along with its annual results announced today, ASOS said its profits next year would be considerably lower than they were in this financial year (pre-tax profit is expected to fall from £193.6 million to somewhere between £110 million and £140 million). The profits in this financial year had been flattered by the lack of customer returns during the Covid era, which benefitted the company to the tune of £67.3 million. With returns returning to normal levels, that benefit will be lost in the coming year.
Equally, it revealed that while it has ambitious long-term growth plans, sales growth would slow in the coming year, from 22% this year to between 10% and 15% next year. While there are many businesses that would kill for that growth, by ASOS's own high standards, it looks pedestrian.
Neil Wilson, chief markets analyst at Markets.com, told Sky News today: "They've really slashed the growth outlook in terms of sales, with profits set to fall by 40% next year. Really I think Nick Beighton has paid the price for the share price performance which has been lacklustre, down roughly 50% over the last year, and the ongoing problem of generating the momentum in sales that a company like ASOS needs."
On top of this, while ASOS emerged as one of the winners of the Covid era (a performance capped by its triumphant £265m purchase of Topshop, Topman and Miss Selfridge from Sir Philip Green's collapsed Arcadia Group), this period of forced store closures has pushed others in the market to up their digital game. ASOS left the high street looking flat footed when it came to online retail and has steamed ahead of them in the 21 years since it was founded, but it may not have it all its own way going forward.
Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, says: "ASOS is a huge player in the world of online shopping, but the pandemic has chivvied a lot of its bricks and mortar rivals to up their own digital offerings, so it will need to peddle hard to keep growing market share.
"This bump in the road comes as there’s a change in leadership at the top, adding a layer of strategic risk."
One of those bricks and mortar rivals that Lund-Yates is likely to have had in mind is Next. Always a strong performer, it has had a stellar year, despite the pandemic. In the past year Next has entered into an agreement to run the e-commerce arm and some stores on behalf of Victoria's Secret, has taken a stake in Reiss, which will be transferring to its "Total Retail" platform, and has secured the franchise for Gap's UK e-commerce business. It has also made a major play into the burgeoning beauty market (with dedicated offline stores and an improved online offer) and there is much more to come. Rumours of a more upmarket brand offer are circulating.
Next is not only performing well when it comes to its own brand but is fast emerging as the platform of choice when it comes to powering the e-commerce operations of other brands, through its Total Retail platform. One can't help thinking that in this regard, it's ASOS that's been left looking somewhat flat footed.
An interesting note in ASOS's announcement today was news of the creation of a "partner fulfilment" offer, which it estimates will make up circa 5% of Gross Merchandise Value in the coming years. Also of note was the appointment of former Zalando board member and current current chair of Danish online marketplace Miinto, Jørgen Lindemann, who brings vital expertise in this field.
However important progress has been made already. ASOS has developed what it is calling TGR (it's Total Global Retailer platform - take that Next, ASOS has Global in its platform name), which was designed to replace legacy infrastructure with a "cutting-edge planning and retail capability along with new reporting metrics to support our global growth ambitions". The rollout process is said to have completed on schedule with "strong user adoption, limited disruption and business benefits being realised as planned". Through TGR, its buying and merchandising teams have improved planning capability, visibility of freight costs and transit impacts to make better sourcing decisions. For the wider business, the additional visibility and reporting metrics enable swifter trading decisions, it has said. TGR will be crucial to the roll-out of its partner logistics programme.
Elsewhere it has said that its future growth will come from doubling the size of its UK and US business (UK sales were up an impressive 36% in past year) and it will also grow its own-label sales to £1bn. Its beauty offer is already strong and ASOS will continue to grow it, it has said. It had been linked to an acquisition of either Cult Beauty or Feelunique (the highly successful, pioneering, multi-brand beauty etailers) but they went to THG and Sephora respectively. Whether ASOS felt it really needed to buy them to grow in this category, or whether it was outbid, is not known.
What is known is that such stunning growth will require significant investment. A new fulfilment centre in Lichfield, opened in August, will help support future growth, but it has said that Capex in the region of £200m to £250m will be required to underpin its strategy. But it won't be spending wildly. When it achieves its £7bn sales goal, EBIT margin will be at least 4%, compared to 5.3% today.
But who's going to lead it through this exciting period? That's the million dollar question (and possibly even the base salary the role will carry). Whoever it is, they are going to have to navigate some choppy waters initially. The global supply chain crisis, which has resulted in eye-watering shipping cost increases (sources have told TheIndustry.fashion that some shippers are citing costs of as much as $25,000 to get a container out of China, which is x10 increase on pre-Covid levels) and has meant deliveries from some of ASOS's partner brands have dried up.
That, however, isn't a problem unique to ASOS with online retailers Boohoo and In The Style both saying they've been hit hard by rising costs, as indeed have Next and pretty much the rest of the market. Whoever takes ASOS on will need to get into the guts of the supply chain and try to insulate the business from future traumas, if at all possible. One suspects the headhunters will also be looking for someone with solid international experience and a strong vision for the brand and a sustainable future for fashion.
Lucy Harris, founding partner at Altrua, and a noted retail headhunter, says: "ASOS needs a modern leader, who understands how to deliver experience to an ever more demanding consumer base. A leader who is fluent in the intersect between Data, Customer Service, ESG and is capable of managing Brand Reputation. This business is global and ‘ever-on’; missing a beat in trend, style and curation will be unforgivable for the future CEO whose DNA will have to encompass being a Merchant, Customer-Obsessed and a Route-to-Market visionary."
OK, so that's a tall order, but the delicious thing about ASOS is that, at 21 years old, it's only just come of age and you get the impression that it's only just started to realise its true potential. Just as there will be top coaches who will be keen to take on Raducanu, who is only 18 and so full of promise (despite the fact that the coming months will be rocky and her dad is apparently a bit of pain), surely there will be top retail executives who will be very keen to get their hands on ASOS? The near term may be tricky but, beyond that, there's still so much to go for.