Analysis: How Asos boss Nick Beighton plans to get the retailer back on trend

The online fashion darling issued a profit warning in December, citing difficult trading conditions and falling consumer confidence for its first – but not last – downgrade of the financial year.

In the terminology of Asos’ 20-something-year-old customers, the City was shook.

During the year, the etailer was also eager to expand its global operations and attempting to open two warehouses – one in Europe and one in the US – at the same time.

That was something chief executive Nick Beighton says, in hindsight, was “over-ambitious” and the combination of factors put the retailer out of fashion in the city.

Another profit warning brought expectations down from an original expectation of £110m to between £31m and £35m for the full year – today’s results came in at £33.1m – and it appeared Asos might be starting to come apart at the seams.

Asos blamed two main factors for the disruption and the hit to its profits.

Beighton says: “We underestimated the impact of large-scale operational change being executed on two continents simultaneously.

“It is also clear that our internal capabilities had not kept pace with this growth and change in complexity, and we lost focus on several of our core competencies, notably product, presentation and customer engagement, which meant Asos simply didn’t look or feel as good as it should do for our customers.”

Lessons learned

However, Beighton says most of the heavy lifting is now behind Asos, it has made “good progress fixing the issues” and, more importantly, “learnt some lessons along the way”.

“We were planning for perfect execution,” Beighton admits. But lack of contingency planning and internal failings meant when things started to go wrong, the etailer was wrong-footed.

“One of my experiences of building a high-growth business for 10 years is making sure you keep your technology, your logistics and your people capability in sync,” Beighton acknowledges. Last year, Asos did not manage to do so and the result was “poor execution or deflection from the things you should be doing”.

“This year is about improving our fitness for this next leg of growth. We ended the year in a better position than we started, and we’ve made a solid start to the new financial year”

Nick Beighton, Asos

While candid about mistakes, Beighton is confident Asos is getting back on track.

“From a warehouse perspective, our Euro hub automation issues are now resolved. The US hub operation is stable and capable of scaling to a much greater level, and the stock build there is progressing in line with our expectations as we move towards peak trading,” he says.

“This year is about improving our fitness for this next leg of growth, firstly strengthening our capabilities. We ended the year in a better position than we started, and we’ve made a solid start to the new financial year.”

So now, as this year’s peak Christmas period approaches, problems have been rectified and Beighton is determined to ensure Asos is fighting fit for renewed growth.

New priorities

Asos set out six priorities for the new financial year to ensure past mistakes are not repeated, and not just restore but enhance what traditionally made it such a hit with shoppers.

The first is to strengthen organisational capability.

Beighton aims to hire four new key executives to bring “greater depth and experience” and take some of the weight off his shoulders. 

The team will be bolstered by a new chief growth officer, chief commercial officer, chief people officer and chief strategy officer, most of which are “down to a shortlist” already.

“The reorganisation also creates senior-level end-to-end ownership of our product and customer below chief executive level for the first time,” Asos reported.

GlobalData analyst Sofie Willmott agrees this is a wise decision “considering it has a number of key areas of focus in the next financial year”.

“Our focus for the year ahead is on further increasing our product choice, availability and newness to provide customers with the best, most relevant product for them”

Nick Beighton, Asos

The retailer also intends to improve efficiency and enhance the customer proposition.

It has invested in a host of new technologies to allow customers to shop in an “intuitive, friction-free and increasingly personalised way”.

The retailer has invested in a number of “efficiency and security initiatives” and developed personalisation and recommendation algorithms to offer customers a much better shopping experience.

Connecting with consumers is “at the heart” of driving growth, so another element of the updated strategy is acquiring new customers, attracting lapsed ones and retaining current shoppers.

Although Beighton says its UK audience remained robust throughout the year, achieving 15% sales growth, customers across the pond spoke with their wallets.

Because 60% of Asos’ revenue now comes from international customers such as those in the US, it is ensuring it takes action to address any customers it has disappointed.

“When we let down a customer we said, ‘we’re really sorry here’s a goodwill gesture that can be a combination of a discount code off your next order, a £5 contribution towards something or we refund your delivery’,” says Beighton.

During the next year, Asos also aims to increase its product offering to reach an even wider audience with newly launched own brands Asos Family, Collusion and, most recently, its Modest fashion edit in April.

“Asos is clearly willing to adapt to survive, unlike some of its multichannel competitors that have been slow to respond to changes in consumer needs”

Sofie Willmott, GlobalData

“Our focus for the year ahead is on further increasing our product choice, availability and newness to provide customers with the best, most relevant product for them,” Beighton says.

It is not just great products that Asos’ customers want. They expect the site to be brilliant and the brand to be present and relevant on social media. Beighton admits that in the last financial year, standards slipped, which affected customers’ trust in the brand.

“Over the last 12 months, you would have seen our presentation not quite looking the way it used to do,” he says. “That’s now been addressed, and we’ve made good progress on it.”

However, Beighton says rebuilding customer trust is taking a little bit longer than expected.

While the fashion retailer must play the long game with some of its strategies, it has been swift with other aspects.

Asos has started to identify areas where it can remove “non-strategic costs” and has already “taken action in a number of areas”.

“These are costs that we feel we are no longer getting customer or business benefits from,” Beighton explains. “We’ve stopped doing the magazine – and made that decision some months ago – and the reason behind that is our customer perspective had shifted.”

Last year brought about 100 head office job losses and streamlining initiatives, along with the Camden HQ’s Friday afternoon party. That might be to the dismay of some staff but with hard work ahead, the business doesn’t need DJs and beer trollies distracting them.

Will the new plan pay off? 

With Black Friday around the corner, low consumer confidence, and a potential Brexit even closer the next few months could be critical for Asos.

Peel Hunt analyst John Stevenson says: “We expect Asos will go hard in peak/Black Friday, driving customer reactivations, with stronger discounts and an extended campaign. Coming up against last year’s failing, Asos needs to beat the market’s lacklustre forecasts to rebuild investor confidence.”

Beighton seems optimistic.

“We didn’t have the best Black Friday last year and some of that was due to the start of our warehousing problems. We weren’t as brave as we should have been.

“But we’re making progress and making sure we’ve got the best foot forward for [this year’s] Black Friday. We are setting ourselves up for a much better Black Friday than we had last year.”

The signs are encouraging. Fourth-quarter sales were up 15% and visits to the site up 20%.

At the time of writing, Asos’ share price had risen 25% following the results, so it would seem Beighton is not the only one who can see light at the end of the tunnel.

Willmott says: “Asos is clearly willing to adapt to survive, unlike some of its multichannel competitors that have been slow to respond to changes in consumer needs and shopping habits.”

All eyes will be on Asos over the next three months, but with the strength of an incoming new team behind him, Beighton has the chance to transform Asos back into the enviable, fashionable stock market darling it once was.