Not so long ago, Asos was the darling of the stock market and hip 20s who thought fast fashion had changed their lives.
The company that pioneered As Seen On Screen had a brilliant niche, creating knockoff versions of clothes featured by the rich and famous at incredible speed.
It was an impressive operation. Asos shares soared, to over 7500p at one point in March 2018.
Over the past five years, that same stock has fallen 90%. The company’s relevance and intelligence seem to have been fleeting.
What went wrong?
New CEO José Antonio Ramos Calamonte is outspoken.
Its statement to the stock exchange today notes the “incredibly difficult economic environment” but does not shy away from the many self-inflicted problems by companies.
A sample: “excessively capital intensive, too complex and overwhelmed on a global scale”.
Asos has “underinvested in marketing”, has become “increasingly dependent on the use of markdown and promotions”, leading to “the erosion of gross margins”.
Anyway, he’s outgrown his boots. He spent money he didn’t have. And he took customers for granted in a highly competitive market.
He went for growth, growth, growth at the wrong time (sounds familiar).
What will he do now? The CEO promises an overhaul of the business model and better inventory control. Products will be cleared (sold) earlier in their life cycle to reduce price markdowns.
Sarah Riding, retail partner at law firm Gowling WLG, said: “The economic challenges involved are extreme but not insurmountable for a retailer/brand with the right mechanics and supply chain agility in place to improve its value for money and above all, put in place a stricter return process that promotes customer loyalty rather than frustration.”
Matt Britzman, equity analyst at Hargreaves Lansdown, says:
“ASOS, armed with a new CEO at the helm, is looking to make changes over the next 12 months with the aim of streamlining the business in these difficult times. Today’s results are broadly in line with expectations, it’s the comments about the outlook that will grab the headlines.Consumers feeling the pinch of higher costs across the board are changing their spending habits, making it especially difficult to predict what the next year will look like.
In its favour, Asos believes that its predominantly young customer base – many of whom live with their parents and therefore do not pay mortgages or fuel bills – should manage the cost of living crisis better than most.
It still has £4bn in revenue a year and 26m customers. Surely there’s still a good deal in there somewhere.