ASOS PLC (LSE:ASC)’s new chief executive José Antonio Ramos Calamonte set out an “ambitious and necessary” 12-month transformation plan.
That’s at least according to Richard Hunter, head of markets at interactive investor.
“Crucially, recently appointed CEO José Antonio Ramos Calamonte has demonstrated he is taking the challenges in front of the company seriously,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
Interestingly, the restructuring plan laid out received a mixed review from industry experts and analysts.
Read more: ASOS reports sharp drop in profit as new chief executive lays out 12-month plan
To navigate the uncertainty over the next 12 months, ASOS said it will focus on delivering four actions.
These comprise “renewing its commercial model and improving inventory management; simplifying and reducing its costs profile; ensuring a robust and flexible balance sheet; reinforcing the leadership team and refreshing the culture”.
Stock management is a key part of this plan, although these are things a retailer like ASOS, valued at £540mln, should really have already had under control according to Russ Mould, an investment director at AJ Bell.
Included in stock management is a non-cash stock write-off of between £100mln and £130mln to cut its inventory levels by the second half, largely owing to slower lead and delivery times, albeit this will come at the cost of heavy discounting in the first half which will keep it in the red.
Hunter added that ASOS “conceded that its supply chain operation has become inefficient, with additional freight, labour and delivery costs weighing on margins.”
To battle this, ASOS said it would “revisit our approach to resource and capital allocation to ensure a focused approached,” adding it would do this through a “clear focus on optimising our cost base, improving supply chain efficiencies, and eliminating excess costs through increased controls.”
Shorter buying cycles, reduced stock levels and new clearance channels are all methods ASOS will lean on to improve efficiency in its supply chain, said Liberum.
“Such a sweeping transformation mid-stream is both ambitious and necessary,” said Hunter.
However, Hunter also adds that it is not without risks, as it looks to rebase its offering.
ASOS can also expect extra costs as the plan moves into more targeted areas, such as data-driven technology and marketing.
Analysts at Liberum, however, were much more critical of the plan and management, adding it “left us with many questions unanswered.”
“The strategy appeared under baked and consequently, the management team sounded underprepared.”
“We are also not overly convinced it takes just 12 months to get your customer base off the discounting drug, especially in the current consumer environment.”
A pivotal 12 months for ASOS as it attempts a major restructuring job at a time of unprecedented uncertainty.
This time next year will tell us if Calamonte’s plan has been a success.