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Asos chief Nick Beighton resigns as it warns over supply chain pressures

Nick Beighton

Asos chief Nick Beighton resigns as it warns over supply chain pressures

Nick Beighton, the chief executive of Asos, is to step down with immediate effect as the online fashion retailer warned that supply chain problems and rising costs will affect its profits.

Asos said Beighton and the board had agreed it was “the right time” for him to go. It said after the departure of Beighton, who has been at the company for 12 years with the past six in the role of chief executive, it will continue to focus on international growth.

“Asos’s management and board have spent considerable time over recent months developing and validating a clear strategic plan to accelerate international growth, building on Asos’s undoubted strength in the UK,” said the Asos chairman, Adam Crozier, who is to stand down next month to take over as chairman at BT.

“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.”

The company, which has benefited from the online shopping boom during the Covid pandemic with revenues up by a fifth and profits rising by more than a third in the year to end of August, warned that the global supply chain shortage is affecting its business.

“Supply chain challenges loom relatively large,” said the Asos chief financial officer, Mat Dunn, who will lead the business on a day-to-day basis until Beighton’s successor is found. “There is anticipation of extended supply lines and pressure on some brand partners means lower availability than we would want. We are expecting the situation to improve [but] peak [pressure] on global supply chain capacity is in the run-up to Christmas, early January through to lunar new year.”

Asos said there would be “notable cost headwinds” including inbound freight costs, labour cost inflation, outbound delivery costs and Brexit duty.

The company, which reported adjusted pretax profits up 36% to £193.6m in the year to the end of August, said it expects profits to fall between £110m and £140m for its next financial year. This is below analysts’ expectations of £186m.

Shares plunged more than 15% in early trading on Monday and have fallen nearly 50% this year.

Beighton said: “I have enjoyed every moment of my 12 years at Asos. 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.”

Asos said that revenues grew by 22% year on year to £3.9bn, driven by “exceptional” growth of 36% in the UK. In the US revenues grew 21%, Europe rose by 15% while across the rest of the world revenue growth was just 6%.

The company said its performance across the rest of the world was particularly poor because of how long deliveries take: for example, in Australia customers have to wait 30 days for an order to arrive.

Dunn said that the company aims to double the size of its US and European business in the medium term. “We want to evolve from a UK-centric brand,” he said.

“Asos seems to have found it hard to keep up with the fast fashion movement in recent years, coming in for criticism for not being able to turn around new product designs quickly, experiencing warehouse problems and poor stock availability,” Russ Mould, the investment director at AJ Bell, said. “Customers have so much choice with where they buy clothes and competition continues to grow. Asos will need to do something extra to make it stand out from the crowd.”

Earlier this year Asos acquired the Topshop and Miss Selfridge brands for £330m, but Dunn said not to expect a flurry of new deals.

“We have the strength and flexibility on our balance sheet and we have the strategic option and if things meet our criteria we will look at them,” he said. “I anticipate we will look at lots of things but not do very many [deals].”

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UK’s Truss defends economic plan that sent pound tumbling

UK’s Truss defends economic plan that sent pound tumbling

British Prime Minister Liz Truss on Thursday defended her economic plan and shrugged off the negative reaction from financial markets, saying she’s willing to make “difficult decisions” to get the economy growing.

In her first public comments since the government’s announcement of billions in uncosted tax cuts roiled markets and drove the pound to record lows, Truss said Britain was facing “very, very difficult economic times.” But she said the problems were global and spurred by Russia’s invasion of Ukraine.

She spoke after the Bank of England took emergency action Wednesday to stabilize U.K. financial markets and head off a crisis in the broader economy after the government spooked investors with a program of unfunded tax cuts, sending the pound tumbling and the cost of government debt soaring.

Truss told BBC local radio that “we had to take urgent action to get our economy growing, get Britain moving and also deal with inflation.”

“Of course lots of measures we have announced won’t happen overnight. We won’t see growth come through overnight,” she said. “What is important is that we are putting this country on a better trajectory for the long term.”

In a series of interviews, Truss said her government’s decision to cap energy bills for households and businesses would help tame inflation and help millions of people facing a cost of living crisis.

But it was not that decision that alarmed the markets. It was the government’s announcement on Friday of an economic stimulus program that included 45 billion pounds ($48 billion) of tax cuts and no spending reductions — without an independent economic assessment of the cost and impact.

The Bank of England warned that crumbling confidence in the economy posed a “material risk to U.K. financial stability,” and said it would buy long-term government bonds over the next two weeks to combat a recent slide in British financial assets.

The bank’s former governor, Mark Carney said that the government and the central bank appeared to be pulling in different directions.

“Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the Bank — has led to quite dramatic moves in financial markets,” he told the BBC.

The pound traded at around $1.08 on Thursday, above its record low of $1.0373 on Monday. It has lost some 4% of its value since Friday.

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Stimulus Packages Provided During Pandemic Triggered Inflation- CBN

The Central Bank of Nigeria (CBN) has attributed the rising inflationary rates to the stimulus packages provided to citizens during and after the pandemic.

It added that although this increased spending, it also created global supply challenges.

CBN’s director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.

The Monetary Policy Committee had on Tuesday, unanimously voted to increase interest rate to 15.5 per cent.

“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.

“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices go up,’’ he said.

Mahmoud also blamed the Russian-Ukraine war, as well as the resurgence of COVID-19 in China for the rise in global inflationary trend.

“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply. The war resulted in some shortages which made prices go up.

“Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he added.

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China’s yuan slides to 14-year low against US dollar

China’s yuan slides to 14-year low against US dollar

China’s yuan fell to a 14-year low against the dollar Wednesday despite US central bank efforts to stem the slide after U.S. interest rate hikes prompted traders to convert money into dollars in search of higher returns.

A weaker yuan helps Chinese exporters by making their goods cheaper abroad, but it encourages capital to flow out of the economy. That raises costs for Chinese borrowers and sets back the ruling Communist Party’s efforts to boost weak economic growth.

The yuan fell to 7.2301 to the dollar, its lowest level since January 2008. One yuan was worth about 13.8 cents, down 15% from its March high.

The yuan has exceeded expectations it might fall to 7 to the dollar after the Federal Reserve started aggressive rate hikes to cool inflation that is at a four-decade high. The Fed has raised rates five times this year and says more increases are likely.

By contrast, the People’s Bank of China has cut interest rates to boost growth that fell to 2.2% over a year earlier in the first six months of 2022 — less than half the official 5.5% target.

The yuan is allowed to fluctuate up or down 2% from its starting price each day in tightly controlled trading. That prevents big daily swings, but down days can add up to a big change over time.

To shore up the exchange rate, Beijing cut the amount of foreign currency deposits Chinese banks are required to hold as reserves to 6% from 8% as of Sept. 15. That increases the amount of dollars and other foreign currency available to buy yuan, which should push up the exchange rate.

Still, that reserve cut is unlikely to stop a slide that is driven by “a strong U.S. dollar and the expectation of more Federal Reserve hikes,” said Iris Pang of ING in a report.

“Less aggressive rate hike talk” might help the yuan rally, but it might weaken further “if the Fed maintains its very hawkish tone” into next year, Pang wrote.

Chinese officials have previously promised to avoid “competitive devaluation” to gain an advantage in trade.

The yuan sank in 2019 during trade tension with then-President Donald Trump. That prompted suggestions Beijing was trying to reduce the impact of U.S. tariff hikes, but there was no official confirmation. The currency later strengthened.

Other governments also are struggling to manage capital flows under pressure from Fed rate hikes. On Friday, Vietnam’s central bank raised a key interest rate in what economists said appeared to be an effort to stop an outflow of money in search of higher returns.

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