Asos’s global overstretch shows in share price and operating profits plunge

theguardian.com:

The new boss of Asos was pushing his luck in describing the full-year performance – a collapse in operating profits from £190m to minus £10m – as “resilient”, but then one realised he was referring only to the UK, which has suddenly acquired the label “core operation”. Implication: the rest of the world was a disaster zone.

Indeed it was, though José Antonio Ramos Calamonte spared shareholders the details of how poor returns on capital have been outside the UK, particularly in the US. “Disappointing,” he said, without putting a number on it. Assume shocking.

Since Asos’s strategy for the past decade has been an attempt to become the world’s top fashion site for twentysomethings, this is more than a small problem. International revenues comprise 55% of the whole, so it’s a bit late for regrets. But long-term shareholders would be immeasurably richer if Asos had stuck to the UK. Huge warehouses were built expensively in Atlanta and Berlin a few years ago to solve previous supply-chain snags but seem only to have created new headaches.

Calamonte’s survey of the landscape is worth digesting for its bluntness. “In recent years, the quest for growth has resulted in Asos becoming excessively capital intensive, too complex and overstretched globally, which has resulted in a lack of meaningful growth and scale in its key international markets of the US, France and Germany,” he said.

Compare that frank admission with what Asos was telling its investors as recently as 18 months ago when Nick Beighton was the chief executive and Adam Crozier the chair. The corporate brag around the numbers in April 2021 trumpeted “exceptional executional delivery with continued discipline and strong operational grip”.

A generous interpretation says Asos