UK companies have opened US distribution centres to grow their businesses but it hasn’t always worked out. Dr Martens has had well-publicised issues, while Boohoo last year stopped supplying US customers from its US hub. Now ASOS is partly doing the same, although it will retain a small US facility.
ASOS
On Wednesday it announced “further efficiencies to its global distribution network” and said that “as part of its commitment to bringing customers the most exciting and relevant product while providing competitive convenience and sustainable, profitable growth,” it will “mothball its Atlanta distribution centre”. It will serve the US market from its “automated UK fulfilment centre in Barnsley, and through a smaller, more flexible local US site”.
The company was at pains to stress that it doesn’t represent any kind of retreat from America. It “remains excited about the opportunity in the US market and believes that its new operating model will better serve its US customer base, while generating a better return on investment. ASOS opened a local US office in 2024 and will continue to grow and build its local presence which it sees as crucial in building great customer experiences. The US remains a core market for ASOS, which it believes can return to sustainable revenue growth and generate c.8% adjusted EBITDA margins in the medium term”.
ASOS justified the closure move saying: “With success over FY23 and FY24 in reducing stock levels by c.50% and launching its new commercial model, which requires lower stock-holding, ASOS can offer better access to product for its global customer base while further reducing its distribution capacity and increasing the efficiency of its operations.
“Having successfully transformed the US into a profitable market over FY24, ASOS sees further opportunity to reinvest in the areas that matter most to its customers by optimising its global distribution model.”
The changes will kick in from H2 FY25 with the combination of the UK automated site and the small US site giving US shoppers “an enhanced product offering, including a broader assortment and faster speed to market of the best and most exciting product, while offering competitive delivery speeds and lowering the total fulfilment cost per order”.
ASOS will also roll out Partner Fulfils in the US in FY25, whereby products are shipped directly by brands, “further broadening the breadth and depth of the best product from our partner brands”.
The Atlanta site’s mothballing will see the company formally marketing the facility following the completion of the multi-year warehouse automation project. Seven ASOS employees directly affected by the change in operations “will be offered alternative roles where feasible, and third-party logistics partners will make efforts to redeploy several hundred staff to nearby sites”.
And perhaps the biggest justification for the move is that the company expects a £10 million-£20 million annualised EBITDA benefit from FY26 onwards, “assuming a reduction in US de minimis thresholds, and a similar benefit to free cash flow from FY26 onwards, with potential for additional working capital benefits”.
In FY25, it expects the impact on adjusted EBITDA to be broadly neutral. It also expects around £190 million of adjusting items predominantly relating to non-cash fixed asset impairments, resulting in a corresponding dent to reported profit.
German retail sales rose in 2024, but growth should be more modest this year due to the high level of uncertainty, according to retail association HDE.
Last year, retail sales rose 1.1% compared to the previous year in inflation-adjusted terms, official data showed on Friday. The HDE forecasts 0.5% growth in real terms this year.
“Consumption and the retail sector in Germany will not really gain momentum in 2025 either,” said HDE managing director Stefan Genth. “There is simply too much uncertainty,” he said. “Wars, high energy costs and overall economic stagnation are a toxic cocktail for consumption.”
In nominal terms, retail sales rose by 2.5% in 2024 and are expected to grow by 2.0% in 2025, according to HDE’s forecast.
The latest HDE survey with 700 retailers shows that 22% of respondents expect sales to increase this year, while almost half of them expect results to be below the previous year’s level.
In December, retail sales fell by 1.6% compared with the previous month, official data showed. Analysts had predicted a 0.2% increase.
Many big names in UK retail had a good Christmas season — despite the sector being generally sluggish — but it seems John Lewis Partnership (JLP) may not have been one of them.
The retailer — which operates its eponymous department stores and webstore, plus Waitrose supermarkets — has missed its profit target after a disappointing festive season.
It hasn’t shared any info officially but internal documents seen by The Telegraph suggest bad news to come when it does release its results.
Those internal documents have only been shared with staff so far with the company saying that sales have fallen short of expectations and it’s unlikely to achieve its hoped-for £131 million full-year profit.
The company is said to have blamed “lower consumer confidence and weaker than expected market confidence” for the sales miss in the month to 21 December, although also the fact that key trading days fell outside the period.
Sales targets were missed at both of the firm’s chains, although the newspaper said it still claimed it outperformed rivals and staff should be “proud of our performance”.
It will be interesting therefore to see exactly what its figures were as a number of rivals have actually reported a good Christmas. If its stores have beaten other supermarkets and chains like M&S, perhaps its targets were too ambitious in the first place.
We won’t know for a while, but we do know that with M&S resurgent, JLP’s supermarkets and department stores have lost some of their lustre as the destination of choice for Britain’s middle classes.
So what were the firm’s benchmarks? Back in September it had said it was seeing strong demand and expected a significant rise in profits for the year to January. The prior year’s pre-tax profit had been £56 million and the year before that it made a loss.
It had also talked about its turnaround efforts paying off and that it was seeing a “considerable improvement” in performance, with the John Lewis chain in particular expected to benefit from a buoyant second half.
It’s been rumoured for some time that he would exit the label but it’s not yet known what his next step will be.
Jones has been widely praised for his work at Dior with his latest men’s collection shown this month being hailed as a success.
He’s been a key creative at LVMH having also designed its Fendi women’s collections. And he helmed Louis Vuitton’s menswear before he joined Dior.
The company said it “wishes to express its deepest gratitude” to the designer “who has accelerated the development of Men’s collections internationally and has greatly contributed to the worldwide influence of the House by creating an inspiring wardrobe that is both classic and contemporary, and connected to some artists of our time”.
And Delphine Arnault, who’s chairman and CEO of Christian Dior Couture,added: “I am extremely grateful for the remarkable work done by Kim Jones, his studio, and the ateliers. With all his talent and creativity, he has constantly reinterpreted the House’s heritage with genuine freedom of tone and surprising, highly desirable artistic collaborations.”
Jones meanwhile called it a “true honour to have been able to create my collections within the House of Dior, a symbol of absolute excellence. I express my deep gratitude to my studio and the ateliers who have accompanied me on this wonderful journey. They have brought my creations to life. I would also like to take this opportunity to thank the artists and friends I have met through my collaborations. Lastly, I feel sincere gratitude towards Bernard and Delphine Arnault, who have given me their full support.”
Entertainment8 years ago