Asos Rises From the Flames

PUBLISHED: 23 Jun 2014 @ 15:47 | Comments (2) | More info about Lou Gutheil

This year has not been particularly good to the share price of Asos (LSE:ASC). Its share price has declined by more than 50% since February after having reached 7,200. Asos shares closed at 1,752 on Friday, June 20th, only to be followed five hours later by a fire in the company’s main distribution center in Barnsley that caused the online retailer to shut down its website.

To be clear, the website shutdown was not caused directly by the fire, but was initiated as a management decision until the air was cleared (literally and proverbially) and they could assess the true extent of the damages. Much to the surprise of many, Asos was able to reactivate the website this morning. Over the weekend there was angst in some quarters as to what would happen to the already battered Asos share price.

Perhaps it was that angst that drove Asos 24 points lower in early trading, causing their shares to open this morning at 2,728. However, once the London Exchange opened, the shares began to trade above 2,752 and have been on the upside pretty much all day. At 3:25 pm, Asos shares are trading at 2,795.50, up 1.24%, or 34.00 pence.

CEO, Nick Robertson explained that “None of the technology, automation or structure of the building has been affected by the fire. Our initial estimate is that approximately 20% of the total stock at the site has been compromised by fire damage and the sprinkler systems. The clean-up process commenced on Saturday morning and progressed quickly. Consequently at 2am this morning we recommenced taking orders. We are fully insured for loss of stock and business interruption.”

To put the 20% figure from Robertson into perspective, the company had a total cost of goods in inventory of £159 million as at 31 May. Approximately 70%, or £111.3 million was at Barnsley. Therefore, the 20% loss would be in the neighborhood of £22.26 million or 14% of the total inventory on hand.

Robertson conclude his statement, saying that, “We have been advised by the South Yorkshire Police that after initial investigations, they are treating the incident as deliberate and have commenced a criminal enquiry. We are cooperating fully with this investigation.”

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