Asos has announced that its chief executive is leaving with immediate effect as the online fashion giant has warned that rising costs are set to hit its profits
Nick Beighton is stepping down following six years in the role and the day-to-day running of the company will be taken over by the finance chief at Asos.
Asos was also cautioned that next year’s profits could fall by as much as 40%.
The clothing company had benefitted from lower rates of people returning clothing during the nationwide coronavirus lockdowns.
Asos said that this had resulted in £67.3m of cost savings, but it also said that the levels of product returns were now going back to normal.
Profit margins are also likely to be affected by an increase in freight costs, Brexit duty and outbound delivery costs, as well as higher wages.
This comes after the Prime Minister has denied the UK is in crisis as both labour shortages and supply issues continue to affect the nation. Amidst the shortages, the PM said that the economy was facing the “stresses and strains that you’d expect from a giant waking up” after the COVID-19.
While adjusted pre-tax profit rose 36% to £193.6m for the 12 months to the 31st of August, Asos now expects that this figure will fall to between £110m and £140m next year.
Asos’s share price tumbled by 15% in early trading before regaining a little ground. Its share price is down 42% since the beginning of 2021.
The warning of lower future profits overshadowed its results for the year to the 31st of August, which showed sales rose 22% to £3.9bn.
Asos said it had attracted another 1.4 million customers over the past year as people turned to online shopping amid lockdowns.
Throughout the period, leisurewear became more popular, and this added to profits as it is less likely to be returned than more formal clothes.
Asos said returns were already normalising, adding that the new customers it attracted in the last year were more likely to send clothes back.
“Asos has enjoyed a huge boost to trading over lockdowns, albeit for less-lucrative casual wear as its core demographic was stuck at home,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
This comes after Chancellor Rishi Sunak has suggested that he may have to introduce further tax rises on the public as the economy emerges from the global COVID-19 crisis, declaring that: “Our recovery comes with a cost.”
The company continued by saying:
“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.”
Asos also set out changes at the top of the business to “deliver next phase of global growth”.
It said Mr Beighton “and the board have agreed that now is the right time for him to step down” as chief executive. A search for his replacement is under way but in the meantime chief financial officer Mat Dunn will oversee the day-to-day running of the business.