There are huge opportunities for Asos in the US and Europe but they will be chasing them without the leader who oversaw one of the great UK online retail success stories of recent years, writes George MacDonald

Today’s shock departure of Asos chief executive Nick Beighton brings the curtain down on a 12-year career at the retailer.

Nick Beighton

Nick Beighton had been in the top job at Asos since 2015

Apart from anything else, Beighton achieved one of the most difficult tasks in business – taking over from a founder. After joining Asos in 2009, Beighton succeeded entrepreneur Nick Robertson at the helm of one of the great UK online retail success stories in 2015 and has stayed true to its purpose throughout.

So close were the pair that they were known as ‘the Nicks’ and during his time in charge Beighton, crucially, maintained the distinctive culture that helped Asos grow at such rapid pace at home and overseas.

As Beighton pointed out in his resignation farewell comments: “When I joined, there were fewer than 200 people and we had annual sales of around £220m. I leave a business reporting turnover of almost £4bn, with more than 3,000 fantastic Asos-ers delivering for 26 million customers in 200 markets around the world.”

That is no mean feat, which makes his sudden exit all the more surprising. Asos revealed in today’s full-year results that it was being affected by some of the same issues that have hit, and will continue to hit, other companies across retail – the extra expenses of Brexit, higher supply chain costs and labour cost inflation. All of that will contribute to adjusted pre-tax profits in the new financial year coming in between £110m and £140m – less than the £193.6m full-year number just reached. 

Broker Jefferies observed: “A downgrade to FY22 had clearly been well anticipated, but we suspect this cut is bigger than most will have envisaged. Although many of the headwinds are understandable and, hopefully, transitory, we suspect investors will struggle to put much credibility on the [medium-term] targets.”

Beighton, like others, had limited room to address such international and global headwinds, and it is not the anticipated step back in profits that has precipitated his departure. One issue was the challenge of US growth.

In its core UK market, Asos delivered a 36% rise in revenue last year as it increased market share, while in the US total sales growth was 21%.

American dreams

Like plenty of its fashion rivals, making big strides in the US and other international markets is top of Asos’ agenda. Some investors and Asos board members have become frustrated that international sales, including in a trophy market such as the US, have not mirrored the strength of the UK and are therefore not reflected in the share price.

Asos today unveiled a target of £7bn of annual revenue within the next three to four years, partly through “accelerating international growth, including doubling the size of the combined US and Europe business”.

For Beighton’s successor, accelerated growth Stateside will be a big priority. Asos chair Adam Crozier, who will hand over the reins to longstanding non-executive director Ian Dyson next month, said today: “Asos’ management and board have spent considerable time over recent months developing and validating a clear strategic plan to accelerate international growth, building on Asos’ undoubted strength in the UK. 

“Beighton’s successor must find ways of driving US growth and making it as iconic in its own right as the Topshop label that it owns”

“This will allow Asos to deliver against the ambition to be one of the few truly global leaders in online fashion retail. Key to that is ensuring that we have the right leadership in place for the next phase and the changes we are announcing today are designed to ensure we deliver against our clear strategic intent.”

It will be a bitter blow for Beighton that he is not the person hitting the international accelerator. There have been some upsets, certainly – in 2019, warehouse woes in the US and Germany sparked a series of profit warnings and ultimately drove a 68% slide in full-year earnings.

However, action was taken to deal with the issues and earlier this year Beighton spearheaded one of the most significant initiatives so far to underpin Asos’ international growth.

After acquiring the world-famous Topshop brand and others following the collapse of Sir Philip Green’s Arcadia fashion empire, he struck a landmark joint venture deal with legendary US retailer Nordstrom to “help drive the growth of these brands [by] building greater awareness and engagement in the US and Canadian market”.

In addition to enabling the sale of Asos own-brands on Nordstrom.com, the tie-up put Asos and Topshop on sale in “selected high-impact Nordstrom stores”, led to the launch of Asos click and collect across Nordstrom’s store estate and was hailed as “the next step in continuing to enhance the Asos proposition for its US customers”. 

Going to the next level

However, as great a prize as the Nordstrom deal was, that retailer is still only a small part of the addressable market for Asos in the US. Beighton’s successor must find other ways of driving US growth and making it as iconic in its own right as the Topshop label that it owns.

As Crozier put it, there is “more to do to accelerate the pace and intensity of commercial execution”. Such capabilities will be the defining factor in the new Asos chief executive’s qualification. 

Dyson tells Retail Week: “Over the last three years, the business has really moved forward. We’ve been thinking about how we get to the next level and inevitably you look at the team you need. Six years as CEO is quite a long time and we, and he, felt it was the right time [to change leadership].” 

“While international growth is at the top of the board agenda, some wonder whether there are other avenues to pursue”

Peel Hunt analyst John Stevenson says during the last few years under Beighton, the Asos operational management team has been strengthened, distribution capacity has been built out and there has been investment in systems. Having improved and overhauled the business in those ways, “it is arguably time for someone new to come in” and further its international aims, Stevenson says. “Someone from outside could accelerate US and international markets,” he concludes.

Mat Dunn, Asos’ chief financial officer who was today promoted to also be chief operating officer, says several improvements have been made and, as well as international ambitions, there is now the chance to “maximise opportunities” in own-brand and reap the benefit of a “true platform model”. 

Asked on today’s analyst call by Stifel’s Caroline Gulliver what characteristics would be expected of a new Asos boss, Dyson says: “It’s very much what you’d expect –it’s a global leader very much focused on growth, innovation, disruptive businesses, with a digital focus.”

Avenues of opportunity

While international growth is at the top of the board agenda, some wonder whether there are other avenues to pursue – avenues that perhaps Beighton was keen to go down in parallel, such as building the fledgling beauty business.

Revenue at Asos’ face and body division rose 49% last year to £150m. The etailer is understood to have eyed the acquisition of a specialist such as Feelunique or Cult Beauty, prior to their purchases by Sephora and THG respectively, to turbocharge that growth. 

Other new areas, such as partner fulfilment for direct-to-consumer companies – something that other pureplays such as AO.com already offer – also provide new opportunities.

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However, it is within its core fashion arena – where an addressable market worth £430bn across the UK, US, Europe and other key overseas markets is forecast by 2030 – in which Asos sees “significant further growth potential”.

That market will now be addressed without Beighton. The appointment of a new chair and chief executive means the pressure will instantly be on to ensure Asos delivers – the share price was down around 13% at close today.

Dyson, a former finance and operations director of Marks & Spencer, says it is not pressure that is front of mind. He maintains: ”I feel privileged. I’ve been here eight years and we’ve only scratched the surface.”

Dunn adds: “We’re really confident in the opportunity for the business. Because of all the work we’ve done, we’re able to invest in those opportunities.”

According to Stevenson, “Asos is primed and ready to go”. Despite the challenges Asos is confronting, that is a testament to Beighton.