Asos’s CEO Nick Beighton has admitted the etailer has “more work to do” to get the business back on track, after a “painful and disruptive” 2018 led to a plunge in profits.
Profit before tax at Asos dropped by 68% year on year to £33.1m in the year to 31 August, following “significant” investment in its warehousing, sustainability credentials and customer acquisition and retention.
“Last year [2018/19] was painful and disruptive”, Beighton said. “With hindsight, we were over-ambitious in tackling two international warehouses at the same time, and our internal capabilities and bandwidth hadn’t kept pace with the changing scale of our business.”
He also admitted there were issues with product presentation and pricing in the period.
However, Beighton said Asos has “confidently and correctly diagnosed the issues” and they are “now resolved”. “From a warehouse perspective our [Berlin] Euro Hub automation issues are now resolved, the US hub operation is stable and capable of scaling to a much greater level. The stock build [in Atlanta] is progressing in line with our internal expectations as we move towards the important peak trading [period].”
Beighton said it was a “challenging year” but it ended the year in a better position than when it started. He said 2019 was a “pivotal period for Asos”, regarding logistics and technology growth.
Turnover rose by 13% to £2.7bn in the year. UK sales grew by 15%, those in the European Union were up by 12% and sales in the US increased by 9%.
However, he said the company has still got “more work to do” to “get the business back on track”: “This year [2019/20] will be about improving fitness for the next leg of growth.” This includes plans to ensure “great product”, “improve choice”, presentation and price, as well as offer a “greater availability of products” and “tons of newness”.
Growth plans also include making four senior appointments and looking at costs “closer than ever before”. Beighton said he is “looking to upweight the [executive] team substantially and augment it over the coming months”.
Asos will appoint new roles including a chief growth officer, chief commercial officer, chief people officer and a chief strategy officer. “We are at the shortlist stage for most of those,” said Beighton.
It comes after Asos appointed former Britvic CFO, Matt Dunn, in the same role in April.
Net debt at the end of the period was £90.5m, reflecting “elevated capex investment in support of the global logistics platform”. The business had net cash of £42.7m in 2018.
Dunn revealed today that the company has been looking into a few key areas of the business to help with costs and debt: “First is where we’ve got duplication in costs/organisation and anywhere investment is not generating the return we would want. We’re also looking at the balance of marketing spend and working spend and non-working spend - trying to make sure we get that balance right.”
Dunn said Asos is also “looking into” the supply chain, in terms of optimising deliveries and warehouse functions.
Meanwhile, Beighton has hinted at a bigger Black Friday this year after a “disappointing 2018”. He said: “Last year Black Friday was disappointing for Asos, we’re scaling up for a much better Black Friday [this year].”
“We’ve got our eye back on the ball,” added Mr Beighton, suggesting that the company was “much better set up” for Black Friday and Christmas this year. “We have capacity in place that we did not have this time last year.”
He said Black Friday is “one of the most important” customer acquisitions of the year for Asos, adding that the promotional day is “not waning” and is instead a “key moment for customers”: “It’s quite simply a very good offer for consumers”.
However, he added: “We’re not going to signal what we are doing for that promotional event. That would be the wrong thing to do right now.”