Asos lost almost a quarter of its value yesterday after a bungled warehouse overhaul knocked the online retailer’s sales growth off course and prompted its third profit warning in a year.
Investors fear one of the brightest names in retail is coming under intense pressure from rivals while its investment-hungry business model stumbles.
Asos was founded in 2000 by Nick Robertson, 51, grandson of the founder of fashion label Austin Reed, and his brother Nigel.
It listed on Aim in 2001 at 20p a share and enjoyed an explosion in sales and value as it cornered the fast-fashion market. It has 18.4 million customers, more than a billion visits to its website and employs about 4,400 people.
Yesterday’s warning sent the shares down by 636p, or 23.2 per cent, to £21.07, meaning the company’s value has fallen by 65 per cent this year.
Investors appeared to be unmoved by the chairman Adam Crozier’s attempt to support the business by buying £100,000 worth of shares.
Asos said that its pre-tax profit will now be about £30 million to £35 million this year, £20 million less than analysts expected. Total sales grew 12 per cent to £919.8 million in the four months to June 30, far below its typical growth rate of 25 per cent.
The company blamed a disastrous IT upgrade at its Berlin warehouse which meant its automated software couldn’t cope with the volume of returned clothes. This resulted in stock clogging up its supply chain, a shortage of goods and customers not being able to buy what they wanted from its website. Nick Beighton, the chief executive, said: “The European customer experience has not been as good as it once was or should be”.
He said the problems should be fixed by September, although analysts at Investec warned that if they remained by November’s peak trading during Black Friday the company would face “calls for management changes and further severe downgrades”.
Asos’s US ambitions have been hampered as its Atlanta warehouse has only been able to stock half the fashion ranges the retailer sells in the UK after third-party brands ran into border control difficulties.
US customs require extra details about the chemical composition of clothes and manufacturer documentation, which a clutch of smaller brands did not have the resources to handle.
Mr Beighton, 50, said there wasn’t an issue with customer demand and highlighted that the number of visits to the website had grown by almost a fifth, but order volumes lagged at 11 per cent.
“In any business of scale there is complexity, it’s unavoidable,” he added. “We are turning from a UK-centric seller into a local international operator and that requires proper muscle and infrastructure to deliver.”
The collapse in the share price means that Asos is worth £1.7 billion, significantly less than its smaller rival Boohoo’s £2.4 billion market value. Boohoo made sales of £856.9 million compared with its rival’s £2.4 billion revenue.