What went wrong with the fast fashion house?


It wasn’t long ago that Asos was a darling of both the stock market and the trendy twenties who thought fast fashion had changed their lives.

The business that was the first As Seen On Screen had a brilliant niche, making imitative versions of clothes displayed by the rich and famous at an astonishing speed.

It was an impressive operation. Asos shares exploded, surpassing 7500p at some point in March 2018.

Over the past five years, the same stock has dropped 90%. The company’s relevance and intelligence seem to have been fleeting.

What went wrong?

The new CEO Jos is Antonio Ramos Calamonte is sincere.

His statement to today’s stock market notes “the incredibly difficult economic environment,” but it does not avoid the many self-inflicted problems of companies.

A sample: “excessively capital-intensive, too complex and oversized globally”.

Asos has “under-invested in marketing”, has become “increasingly dependent on the use of discounts and promotions”, leading to “erosion of gross margins”.

In short, he outgrew 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 (this sounds familiar).

What will he do now? The CEO promises a review of the business model and tighter inventory control. The products will be liquidated (sold) at the beginning of their life cycle, to reduce price reductions.

Sarah Riding, retail partner at Gowling WLG law firm, said, “The economic challenges at stake are extreme but not insurmountable for a retailer / brand with the right mechanisms and supply chain agility in place to improve its focus on value for money and above all, implement a more rigorous return process that drives customer loyalty rather than frustration. “

Matt Britzman, an equity analyst at Hargreaves Lansdown, says:

“ASOS, armed with a new CEO at the helm, is looking to deliver change over the next 12 months in an effort to simplify business in these difficult times. Today’s results were broadly in line with expectations, it is the comments on the outlook that will grab the headlines. Consumers feeling the pinch of higher costs across the board are changing their spending habits, making it particularly difficult to predict what the next year will be like. “

In its favor, Asos believes its predominantly young clientele – many of whom live with their parents so don’t pay mortgages or fuel bills – should handle the cost of living crisis better than most.

It still has £ 4 billion a year in revenue and 26 million customers. There is definitely a good deal left somewhere.

Leave a Reply

Your email address will not be published. Required fields are marked *