Asos CEO Nick Beighton is stepping down as chief executive, as the fast-fashion e-tailer warned that supply chain problems are likely to impact profitability.
In a Nutshell: The CEO announcement came as Asos reported full year results for the period ended Aug. 31, 2021 The changes come as part of a strategy to deliver annual revenue of 7 billion pounds ($9.54 billion) within the next three to four years. Asos aims to accelerate international growth, doubling the combined U.S. and Europe businesses, and adding at least 1 billion pounds ($1.36 billion) to its annual own-brand sales.
Asos’ board and Beighton agreed that he should step down immediately. The 12-year Asos veteran, who spent six years as CFO, will continue through the end of the year to assist with the transition. The company’s CEO search focuses on a seasoned global expansion expert.
“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. This will allow Asos to deliver against the ambition to be one of the few truly global leaders in online fashion retail. 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,” said chairman Adam Crozier, who will be succeeded by Ian Dyson as non-executive board chair beginning Nov. 29, for a three-year term.
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“I have enjoyed every moment of my 12 years at Asos. When I joined, there were fewer than 200 people and we had annual sales of around 220 million pounds ($299.7 million). I leave a business reporting turnover of almost 4 billion pounds ($5.45 billion), with more than 3,000 fantastic Asos-ers delivering for 26 million customers in 200 markets around the world. I am particularly proud of the way in which we have led our industry on putting sustainability at the heart of everything we do with our Fashion with Integrity programme,” Beighton said.
In other changes, CFO Mat Dunn will take on the additional role of chief operating officer and lead the business on a day-to-day basis. Katy Mecklenburgh, director of group finance, will become interim CFO. And Jøgen Lindemann, chair of Danish-based online fashion marketplace Miinto, will join the board as non-executive director.
Asos shares tumbled about 14 percent to 2,388.00 pence ($32.55) during Monday’s mid-day trading session on the London Stock Exchange. Over a 52-week period, shares have seen a high of 5,994.95 pence ($81.70) and a low of 2,300.00 pence ($31.35). Shares of Asos on July 15 ended the day’s trading session at 3,854.00 pence ($52.53), and have been struggling since then, eventually beginning a gradual descent to its current trading range. Companies often change CEOs when stock prices decline as they look for ways to energize growth.
As for full year results, “Asos has delivered another strong performance, with continued growth in customer numbers driving further increases in sales and profits. Our success has been underpinned by our focus on delighting fashion-loving twenty-something customers with greater choice, service, and engagement. We have also continued to invest in our platform and offer, including the successful acquisition and integration of the Topshop brands,” Dunn said.
Asos grew its active customer base by 13 percent to 26.4 million for the year. Europe was most impacted by global supply chain challenges. Gross margin was down by 200 basis points to 45.4 percent, driven by elevated freight and Brexit-related duty costs, product mix, foreign exchange and increased customer investment.
Operational highlights include 49 percent growth of its Face + Body category and the integration of the Topshop brands “with sustained triple digit sales growth since acquisition.” In addition, Asos brands will be sold at select Nordstrom stores and on Nordstrom.com, with the first product to be sold by year end and the full launch in the first half of 2022.
Asos projects sales growth in the range of 10 percent to 15 percent for fiscal 2022, with first half revenue growth in the mid-single digits, reflecting tougher first-half comps against 66 percent growth in fiscal year 2019.
“Industry-wide supply chain pressures expected to continue through H1, resulting in longer lead times and constrained supply from a number of our partner brands,” Asos said Monday. The company expects sales to pick up the second half, when a comeback in social events should drive demand and supply chain congestion is expected to clear.
Net Sales: Total revenues rose 20 percent to 3.91 billion pounds ($5.33 billion) from 3.26 billion pounds ($4.45 billion). Revenue included a 19 percent gain in retail sales to 3.78 billion pounds ($5.16 billion) from 3.17 billion pounds ($4.32 billion).
Asos reported “exceptional” 36 percent U.K. sales growth. U.S. sales jumped 21 percent and European sales rose 15 percent.
Earnings: Profits before taxes rose 25 percent to 177.1 million pounds ($241.4 million), or 125.5 pence ($1.71) per diluted share, from 142.1 million pounds ($193.7 million), or 125.6 pence ($1.71), in the year-ago period.
For fiscal year 2022, Asos expects adjusted profits before taxes in the range of 110 million pounds ($150.1 million) to 140 million pounds ($191.0 million). This includes continued improvements in operational initiatives to reduce costs and inflationary pressures, although Asos also cited cost headwinds, such as incremental inbound freight costs, Brexit duty annualization, outbound delivery costs and labor cost inflation.
CFO’s Take: “Looking ahead, 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,” Dunn said. “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.”