[UK] A tale of two ecommerce focused apparel retailers: ASOS and NEXT

Prompted by BBR Radio 4 News this am, who presented this in a similar way

Recent results announcements (today) paint two very different pictures of ecommerce focussed apparel retailers, who are increasingly operating in very similar ways

ASOS: (delayed) Annual Final results to 3 Sept 2023 (rounded): Bottom line loss £297m (on turnover of £3538m), debt increased to £320m). Significant investment in “ASOS Fulfilment Services” to build out their dropship capability. Looking to sell the Topshop brand (acquired from the bankruptcy of Arcadia Group) to raise money (simplifying their owned brand portfolio)

NEXT Retail group: Third Quarter trading statement increases fully year profit guidance by £10m to £885 (on total size guidance of £4740m). Taking full control of the Fatface brand (and maintaining significant/majority ownership stakes in brands like Reiss). NEXT has developed their “TOTAL” platform (dropship/marketplace/fulfilment services) over some years, partially emulating competitors like Amazon and Zalando and is clearly using it to great effect, with further investments to come. Long standing Chairman Lord Wolfson does it again in a highly competitive trading environment.
Half Year results (July) https://www.nextplc.co.uk/~/media/Files/N/Next-PLC-V2/documents/2024/half-year-results-july2023.pdf (the Q3 trading statement is a one pager and not worth linking, the HY statement is well worth reading, written in a breezy and accessible style)

Key points about NEXT for comparison

  • Half Year: 62% sales ecommerce, 38% retail stores (no change from prior half year)
  • Small increases in direct ecommerce/retail stores Half year on year, despite closing a small number of stores in the half year
  • NEXT price point is a bit higher than ASOS.
  • Both NEXT and ASOS have overseas operations (ASOS trades in North America, NEXT seems to have minimal presence in North America).

It is important to note that the comparison shows two different phases for businesses operating in the same category/sector.

Asos is in the early stages of a turnaround as the business was in too many markets, had too much inventory, and contained unprofitable customers and brands. Asos has lots to do still.

Next has had the right amount of inventory and selection available to consumers and ensured that they can delight consumers on what they want to purchase.

It is very much a demonstration of the value of running the business right (and having the right strategy) vs not.

Asos absolutely still has a mountain to climb.

NEXT seems to be digging a moat around their castle, being the business of choice both for their customers but also some 3rd party brands (via “total platform”) vs. other “department” stores (especially M&S). Credibly competing in their chosen geographies against e.g. Zara.

Would be interesting to see if there are comparable retailers in other companies operating the NEXT playbook

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@vinny is a huge ASOS fan or so I hear!

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Vinny also invited someone working at my company (New Look) to speak at a dinner he is organising (Raine Peak, interim Head of ecommerce marketing, freelancer)

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