“Is our business 18% worse now than it was last week?” That is the question Asos chiefs were asking themselves following a trading update that sparked a share price rout, wiping out almost a fifth of its value within minutes.

Asos-Topshop

The sell-off of a business that performed strongly before and during the pandemic, and which expects to deliver profits in line with City expectations, was brutal – and it looks overdone.

The share-price reaction to the four-month numbers reflected a raft of factors that combined to put the frighteners on investors. 

Foremost among them were 12 words: “Trading in the last three weeks of the period was more muted.”

That, along with supply chain challenges affecting costs and speed of delivery, and continued uncertainty about the Covid outlook and its impact on Asos’ young shoppers, meant that growth in the final period of the financial year is likely to be flat – not what shareholders in an online star want to hear.

Asos may have been particularly harshly punished because of its golden-child status and that meant there was probably also a bit of shooting the messenger going on. 

“If even wunderkind Asos is feeling the pain and not invincible from tidal-wave forces such as the pandemic, what hope for some other retailers?”

Investors read across from Asos and marked down other retailers on the assumption that more would face the same issues. Stars such as Boohoo and JD Sports were down following Asos’ update.

If even wunderkind Asos is feeling the pain and not invincible from tidal-wave forces such as the pandemic, what hope for some other retailers?

Covid is still upsetting the lives, holiday plans and associated spending of 20-something consumers, as well as adding to the expense of container shipments bound for Asos.

The etailer’s logistics have been hit on the demand side, too, because of longer delivery times – catapulting some spend to local competitors in some of Asos’ international markets.

The point, though, is that sales still rose 21% – led by the 36% jump in its core UK market – and profits are not going south.

Whatever the degree to which Asos’ subdued recent trading may be particular to it, or reflective of retail more widely, the longer-term picture looks bright.

Last week did not just bring a trading update, it brought a groundbreaking joint venture between Asos and Nordstrom

The US department store group is taking a minority stake in Topshop, the iconic brand Asos bought out of the administration of tycoon Sir Philip Green’s Arcadia empire, along with stablemates Topman, Miss Selfridge and athleisure label HIIT.

The joint venture was hailed by Asos as a “new business model”. It provides an opportunity to further build Topshop and its ex-Arcadia sister brands in the States – where Nordstrom has sold it since 2012.

In 2019, Topshop and Topman together generated sales in the US of $1bn.

The tie-up will take other Asos own-brands, such as Collusion, into Nordstrom stores, helping the etailer build engagement and sales more widely, while also enhancing the etailer’s click-and-collect proposition through Nordstrom’s bricks-and-mortar network.

“Assuming the venture is a success, more such tie-ups could follow that better combine the art and science of retail – from data to style – with in-store creativity”

The deal looks good, too, because of Nordstrom’s commitment. It has a direct stake in making the arrangement work, rather than being simply a wholesale customer.

Assuming the venture is a success, more such tie-ups could follow that better combine the art and science of retail – from data to style – with in-store creativity.

Asos has, like all retailers, had ups and downs over the years. But “muted” trading is hardly a catastrophe, unlike the damage done to its Hemel Hempstead warehouse in the 2005 Buncefield explosion or more routine disruptions such as a pair of profit warnings a couple of years back – all of which it has bounced back from. 

Asos has more often shown itself to be an astute and agile business, alert to what customers want today and able to anticipate what they are likely to want in future.

It will take more than a so-so few months to blow the online apparel star seriously off course.

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