Printed
January 15, 2025
UK firms have opened US distribution centres to develop their companies nevertheless it hasn’t at all times labored out. Dr Martens has had well-publicised points, whereas Boohoo final 12 months stopped supplying US prospects from its US hub. Now ASOS is partly doing the identical, though it should retain a small US facility.
ASOS
On Wednesday it introduced “further efficiencies to its global distribution network” and stated that “as part of its commitment to bringing customers the most exciting and relevant product while providing competitive convenience and sustainable, profitable growth,” it should “mothball its Atlanta distribution centre”. It should serve the US market from its “automated UK fulfilment centre in Barnsley, and through a smaller, more flexible local US site”.
The corporate was at pains to emphasize that it doesn’t signify any sort 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 transfer 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 modifications will kick in from H2 FY25 with the mixture of the UK automated website and the small US website giving US buyers “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 may even roll out Associate Fulfils within the US in FY25, whereby merchandise are shipped instantly by manufacturers, “further broadening the breadth and depth of the best product from our partner brands”.
The Atlanta website’s mothballing will see the corporate formally advertising the ability following the completion of the multi-year warehouse automation venture. Seven ASOS workers instantly 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 maybe the largest justification for the transfer is that the corporate expects a £10 million-£20 million annualised EBITDA profit 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 impression on adjusted EBITDA to be broadly impartial. It additionally expects round £190 million of adjusting objects predominantly regarding non-cash mounted asset impairments, leading to a corresponding dent to reported revenue.
