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Asos warns on profits as CEO Nick Beighton steps down
11th Oct 2021 08:03
(Sharecast News) - Asos said in a surprise announcement on Monday that chief executive Nick Beighton has stepped down with immediate effect, as it warned over profits, sending shares in the online fashion retailer tumbling.
Asos said Beighton and the board have agreed that now is "the right time" for him to step down after 12 years with the business, including six as CEO. The search for a successor is commencing.
Current chief financial officer Mat Dunn will take on the additional role of chief operating officer and lead the business on a day-to-day basis, while finance director Katy Mecklenburgh will become interim CFO.
Ian Dyson will become non-executive chair of the board, replacing Adam Crozier, whose departure had already been announced.
News of Beighton's exit came alongside results for the year to 31 August, which were brought forward from their scheduled release date on Thursday. They showed that adjusted pre-tax profit rose 36% to £193.6m on revenue of £3.9bn, up 20% on the previous year. Reported pre-tax profit was 25% higher at £177.1m.
The company hailed "exceptional" sales growth of 36% in the UK to £1.65bn, and "strong" growth of 21% in the US. Sales in the EU and Rest of World were up 15% and 6%, respectively.
Asos said FY22 sales growth is expected to be between 10% and 15%, with first-half revenue growth slowing to mid-single digits. This reflects tougher comparables in the first half, particularly in the UK and industry-wide supply chain pressures.
The group expects FY22 adjusted pre-tax profit to fall to between £110m and £140m. If you take the mid-point of the range, this is around 35% below the market consensus forecast of £193m.
Asos said it would be hit by the loss of a £67.3m "Covid-19 related benefit", as shoppers were less inclined to return clothes during lockdowns. It also pointed to higher freight and labour costs.
Mat Dunnn said: "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 20-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. This performance is based on the hard work and determination of all Asos-ers and I want to thank them for everything they have done.
"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."
At 0905 BST, the shares were down 13% at 2,423p.
Shore Capital analyst Eleonora Dani said: "What will undoubtedly disappoint this morning is management's expectation of FY22 sales growth in the 10-15% range (below consensus at 18%) and profit before tax in the £110-140m range, with the mid-point circa 30% below current consensus."
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Asos has enjoyed a huge boost to trading over lockdowns, albeit for less-lucrative casual wear as its core demographic was stuck at home. 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.
"Higher labour and freight costs are just one problem, but Asos has also had trouble getting hold of the right stock, so in some cases, although demand has strengthened, the group couldn't meet it. Supply chain problems are going to continue for the foreseeable future, which is some explanation for why next year's sales outlook is so disappointing.
"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."
Asos said Beighton and the board have agreed that now is "the right time" for him to step down after 12 years with the business, including six as CEO. The search for a successor is commencing.
Current chief financial officer Mat Dunn will take on the additional role of chief operating officer and lead the business on a day-to-day basis, while finance director Katy Mecklenburgh will become interim CFO.
Ian Dyson will become non-executive chair of the board, replacing Adam Crozier, whose departure had already been announced.
News of Beighton's exit came alongside results for the year to 31 August, which were brought forward from their scheduled release date on Thursday. They showed that adjusted pre-tax profit rose 36% to £193.6m on revenue of £3.9bn, up 20% on the previous year. Reported pre-tax profit was 25% higher at £177.1m.
The company hailed "exceptional" sales growth of 36% in the UK to £1.65bn, and "strong" growth of 21% in the US. Sales in the EU and Rest of World were up 15% and 6%, respectively.
Asos said FY22 sales growth is expected to be between 10% and 15%, with first-half revenue growth slowing to mid-single digits. This reflects tougher comparables in the first half, particularly in the UK and industry-wide supply chain pressures.
The group expects FY22 adjusted pre-tax profit to fall to between £110m and £140m. If you take the mid-point of the range, this is around 35% below the market consensus forecast of £193m.
Asos said it would be hit by the loss of a £67.3m "Covid-19 related benefit", as shoppers were less inclined to return clothes during lockdowns. It also pointed to higher freight and labour costs.
Mat Dunnn said: "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 20-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. This performance is based on the hard work and determination of all Asos-ers and I want to thank them for everything they have done.
"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."
At 0905 BST, the shares were down 13% at 2,423p.
Shore Capital analyst Eleonora Dani said: "What will undoubtedly disappoint this morning is management's expectation of FY22 sales growth in the 10-15% range (below consensus at 18%) and profit before tax in the £110-140m range, with the mid-point circa 30% below current consensus."
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Asos has enjoyed a huge boost to trading over lockdowns, albeit for less-lucrative casual wear as its core demographic was stuck at home. 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.
"Higher labour and freight costs are just one problem, but Asos has also had trouble getting hold of the right stock, so in some cases, although demand has strengthened, the group couldn't meet it. Supply chain problems are going to continue for the foreseeable future, which is some explanation for why next year's sales outlook is so disappointing.
"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."