Asos turnaround shows Covid has been kind to online retailers

I t’s amazing now to recall that stock market investors initially thought lockdowns would be bad for online clothing retailers. Shares in Asos roughly halved to £13 during the month of March 2020. They now stand at £53 as business has boomed.

Best of all for shareholders, the company has stopped shooting itself in the foot. Asos over-stretched in 2018 and 2019 by trying to build mega-warehouses in Berlin and Atlanta at the same.

It botched both projects, issued three profit warnings in rapid succession, and made outsiders wonder if an impressive revenue line would ever yield solid profits.

An answer seems closer now. The rough tally this financial year is looking like almost £4bn in sales and about £170m in pre-tax profits. If 4%-ish becomes a reliable profit margin, Asos will have shaken off one big investment worry.

The margin triumph is not yet in the bag, it should be added, because trading in the time of Covid yielded a double benefit. Punters did not merely buy more items, they also returned fewer (nobody’s too fussed about the fit of stay-at-home jogging bottoms).

There’s also the slight worry that Asos’s 20-something audience is more exposed to a drop in disposable income, where the worst effects may still lie ahead.

In the round, though, Covid conditions have clearly been kind to Asos. The pace of sales growth accelerated to 24% in the last four months of 2020, including a remarkable 36% in the UK. Not all the extra business will stick when shops reopen, but a lot should.

Asos is now back at a £5bn valuation. Next, with half its business online already, has passed £10bn – its shares have doubled since their own wobble in March.

The stock market’s revised view, in other words, is that prospects for online clothing retailers have changed permanently and fundamentally. Yes, that conclusion now seems blindingly obvious. In retrospect, the sell-off last March was an extraordinary event.

NAO needs listening to

Governments should listen more closely to the National Audit Office, argued the shadow chancellor, Anneliese Dodds, in her Mais lecture on Wednesday evening. That thought is hardly revolutionary, but it has two obvious virtues. First, it is a good idea. Second, Labour needs to talk the language of competence in public spending.

The tragedy of the NAO, the independent public spending watchdog, is that it produces excellent – and often damning – reports that ministers are somehow able to brush aside.

A humdinger from the NAO last November set out, in cold terms, the scale of waste and cronyism in the government’s procurement programme during the pandemic.

About £10.5bn out of £18bn of public contracts were awarded without competitive tender and companies were 10 times more likely to succeed in their pitches if they had connections to the Tory party. Even if one allows for the need to act at speed during a health emergency, the statistics are scandalous.

Dodds’s idea is that the head of the NAO should make a single annual assessment of the effectiveness of public spending and the government should be obliged to respond. That would not, of course guarantee an end to waste and cronyism. But, yes, it’s a more accountable approach than allowing NAO reports to generate a day’s headlines and then gather dust.

The political point is that Labour desperately needs to make a display of being on top of financial details. Even when the pandemic has passed, the UK’s budget deficits will still be enormous for years to come.

So, yes, hammering away at “value for money” in public spending is essential given the daily reminders (the latest being provision of free school meals) of the government’s loose grip of details.

Dodds is an unflashy politician and, until Labour breaks more definitely with some of the policy pledges of the Jeremy Corbyn era, her speech may be lost in the political noise.

But it aimed broadly in the right direction, which is a start. Efficient public spending matters, never more so than now.

Covid brings HR complexities

How should companies treat staff who refuse to get vaccinated? Make them take regular Covid tests, says Alan Jope, Unilever’s chief executive.

Yes, that’s a commonsense answer. But can one also sack employees who refuse to get tested, or make them work at home?

Covid complexities have only just started for human relations departments.