Asos plunges as profit warning raises pressure on CEO Beighton

Bloomberg

Asos Plc plunged after the online fashion retailer warned that earnings will slump this year, putting pressure on Chief Executive Officer Nick Beighton as he tries to fix distribution issues and prop up a falling stock price.
Profit before tax may fall as much as 71 percent, Asos forecast. Shifting to new technology at US and European warehouses is taking longer than expected, affecting stock availability, according to the company, known for products such as leopard-print bodysuits. The shares fell as much as 22 percent, wiping 513 million pounds ($640 million) off the company’s market value.
latest warning shows the company is still struggling to come to grips with operational issues, after revising its sales outlook downward in December and issuing a further downbeat sales update in March.
The shares have lost 63 percent of their value over the past 12 months, though the company tried to reassure investors with a more positive report for its first half in April.
The company has been struggling to keep up with other online fashion chains targeting young shoppers, especially Boohoo Group Plc.
The issues “have been self-inflicted,” wrote Greg Lawless, an analyst at Shore Capital.
The company said growth in the US and Europe was held back by problems at new warehouses in Berlin, where it’s ramping up automation, and in Atlanta, where it has struggled to build up stock.
“We are clear on the root causes of the operational challenges we have had, are making progress on resolving them, and now expect to complete these projects by the end of September,” Beighton said.
The CEO has been in his position since 2015, and Asos shares had doubled in value as of last year. The recent slump has erased most of those gains.
Pretax profit is now expected to be in a range of 30 million pounds to 35 million pounds. Analysts had a consensus estimate of 55.9 million pounds.
Berenberg analysts said it’s hard to understand why the problems were not known sooner, given that Asos has live data on sales and other metrics.
Asos “must now provide clear guidance on when operational issues will end and also provide clear evidence that these issues are the primary cause of weakness,” they said in a note.