Member Info for danl90

@ragtrade replying to you post 11:41 - to make clear for you again it is not a problem with Asos it is a problem with the quality of its earnings

When you buy a business a key point to understand is the QofE and this is far higher with boo for the factual numbers i have given you. Yes Asos can grow but for every £160 of revenue it grows it keeps only £1 that is my issue

NOOOOOO! Your ability to infer words and not read the black and white has struck again! I haven't said Asos is on the way out and for the 100'th time I'll say again the point I was making is that Gymshark is a better point for multiple comparison than Asos is. This is how valuations partly work, you monitor them against peers and i'm saying actually Asos isn't a great fit as a peer as its a different model! It is a reseller hence why £1.6bln of extra effort only makes you an extra £10m quid. If boo add £1.6bln of revenue we would add in the region of £150m to PBT. I'm trying to help you understand they are different business models

I'm not disagreeing on any of your points re brand strength/ weakness hence why I ignore them and agree we should buy topshop I'm trying to explain to you the mechanics of how these businesses generate profit and I am trying to say Asos have to rev the engine a hell of a lot harder than boo do to make cash! On the figure above it's c.x10 harder which is all well and good while they have the reseller space to dominate but who knows what might come along maybe amazon will get it's act together or maybe it won't but here I'm saying that there is no defensible moat around that reseller part of the business.
Having a defensive moat (brand) around high margin earnings (10% EBITDA of Boo vs c.2 - 3% for Asos) is value. You can be the best operator or largest operator in a sector and it doesn't always equal value this is also shown why different sectors trade at different valuation multiple ranges

Asos's own brand is its largest offering I agree it is 33% of the business as I have said before but then is it not a concern that the largest part of its business isn't growing? (£1bln sales last year and £1bln sales this year - flat as a pancake). Yes asos is mature since 2000 but it's own brand isn't! That should be a screaming issue for the business. All it's growth last year came from reseller (hence the GM% dilution). So once again to be clear I'm not saying this is awful for Asos but it's a feature of that business that they need to address. They trade on a fantastically high multiple all i'm saying is when you compare
1) quality of revenue - boo grows faster at GP level (just to make it fairer for asos and it's false revenue number)
2) quality of earnings - boo is 100% own brand vs 33% asos
3) margin premium - figures from above re boo adding £150m on similar rev growth
4) defensible position - boo's own brand grows and asos's doesn't also Asos is open to attack on 66% of its business

boo deserves a premium - even more so when they add Topshop. None of this is saying asos isn't good but it's not got the value drivers boo can have - adding £1.6bln revenue for £10m isn't all that great

Perhaps you need to read an earlier post of mine but Asos revenue is not a real number it is grossed up for passing through third party products. Their "real" revenue from selling a third party branded shirt is likely low as being a reseller is low margin operation. To compare these two businesses you are better looking at gross profit and seeing what actual revenue they capture. Asos actually try to flatter their gross profit in their annual statements by showing distribution costs below GP so to make like for like with boo you have to add this above.

Asos FY20 - GP (incl distribution) is c.£1.1bln
boohoo (HY to Aug-20 extrapolate for full year although due to Black friday and christmas being H2 you could say this is prudent) - (£450m x2) = £900m

Does this make clear for you that Asos revenue number is just noise as it is crappy low margin reseller revenue and not purer own brand sales. This also links in to the revenue and gross margin movements I explained to you earlier.

The picture gets even worse for Asos at PBT as at that level the difference is only about £10m. So c.£1.6bln extra revenue than boo (using same periods and calc above) and you only make an extra £10m! this is why the comparison isn't true

@ragtrade I wouldn't hate if Asos are a good esg brand because that may be factually true. My issue with you view prior was that Asos was the same business as boo when actually only 33% is and as I've pointed out that 33% achieved 0% growth last year so actually isn't very good and if it doesn't kick on this year you'll seen multiple contraction in Asos. All I tried to make clear from the first post was that gymshark and it's x33 p/e rating is a better comparator for boo as they are the same business model. Asos is only 33% the same business

I agree ihalli we are entering the next phase of the retail battle. The easy part of destroying the high street is almost over and next you will see the online businesses begin to compete more aggressively particularly I believe on branding and quality as the ease of picking up market share from just having next day delivery won't gather you 20% growth a year as easy from now on.

I think this has two impacts 1) it will see increased social media advertising particularly towards Gen Z but also the age older than millennials (what a life to be an influencer) 2) we will see some margin compression as quality has to step up. The part of quality stepping I think can feed into Boo's greener creds but this will be a slow journey and will not apply to whole ranges there will need to be a core of fast and cheap

Topshop just gives us a wider audience to target one that atm our "edgy" brands don't hit. We could even position topshop as a more ethical brand perhaps? Use that point to expand prices to more ethically focused consumers and push away some of the compression I mention above. I think that ESG messaging can also be strong for international sales and will ultimately bring back some of the very deep pocketed ESG funds!

Asos revenue figure isn’t a real number it’s a gross up figure as it passes through third party products ie sell a top for £25 but buy it for £20 you’ve only captured £5. Where as boo’s revenue is purer. You see this in the gross profit movement. Asos grows 20% revenue the Gross profit only goes up 16% (this is as the growth last year was all reseller and not Asos own brand as I pointed out to you). This margin dilution is something that detracts from valuation (boo and Gymshark don’t have this issue - boo revenue up 40% and gross profit up 40%). If Asos own brand had grown the GM% would shift. So the view that Asos is bigger and is only partly true as it’s just a facility of being a reseller and why being a reseller is awful as it cannibalises your own brands (hence why I point to you again they didn’t grow!)

In regards to Topshop we both (thankfully) agree. One thing I think would be good to understand from you is why and how do Shein get cheap delivery into the U.K.? The daily mail noted this is partly due to a tax and custom allowance? Is this a door that will close?

For the rest of the board Topshop is a great brand and known in the US so boo can reposition via IG and TikTok. The target audience met by Topshop/ topman isn’t met by boo. I’m a key point of this. Boohooman does nothing for me. I can’t relate to the models or branding for me personally (my cousins love it and it’s common around the city centre) but I would shop at topman so as ragtrade points out we need to plug into this market also

Do you not think we could see the dividend restated at the update on the 4th Dec?

@ragtrade. We aren’t in any way looking to emulate Asos. We are not going to be a reseller! We do not buy third party brands and sell them and we never will. Asos is a different business model. Yes a third is similar to boohoo but two thirds isn’t! And as I have shown you with the one third that is similar to boo it had 0 growth last year!

I agree on your topshop point but for the point I say above as we control and own the brand. We do not want to be selling third party brands as Amazon will eat that market! There was a documentary this week about amazon and how in a lot of instances it was cheaper place to buy clothes and other items than the retailers own website. This will be the same for Asos in relation to third party brands and Asos delivery is slower!

Fine you understand supply chain but you don’t understand valuation and how a business drives it’s multiple. Being a reseller is value destructive. Two thirds of your business being a reseller is value destructive. That your own brands aren’t growing is value destructive. Asos is doing well atm as the low hanging fruit of high street is easy to compete against but as other online platforms step into third party retail this will get harder. Asos only grew 20% last year that’s not shoot the lights out. Amazon clothing (mostly third party retail) is $30billion! That’s 10 times the size

The point I am trying to make which is what I was saying from the start is that boohoo deserves a multiple more akin to Gymshark! The multiple is how a business’s earnings are valued and the quality of those earnings.
What makes boo’s quality of earnings better than Asos is
1) the margin we capture as all own brand
2) the rate of growth we achieve
3) being a brand gives defensible position (if you want PLT you have to buy from Boo

Asos doesn’t hit any of those three as well as boo or gym shark hence why I was saying we should look to Gymshark for where our multiple should be!

So you turn in two weeks in the U.K.? So turkey turn in two weeks also but what about the week of travel you refer to? Has that been omitted now?

Amazon no I’m not saying fast fashion I’m talking about the reseller element! I was literally so clear on that how did you misunderstand. Amazon can sell a Northface coat quicker or as quick as asos. This puts 66% of asos business at risk. Not saying asos will lose but it is at risk and there is no defence asos can have to this. While you quote revenue figures Morgan Stanley and Wells Fargo but amazon clothing sales at $30billion for 2019! That’s x10 Asos! You ability to be diligent is awful

Asos own brand. Yeah it’s 33% of the business and I gave you the figures from the annual results 2019 £1bln of sales. 2020 £1bln of own brand sales. It DIDN’T GROW! That means the 20% growth Asos saw last year was reseller brands! That’s a clear sign of 1,2 and 3 not being hit!

I know you work in supply (questionable as you keep deciding to miss out parts - in an earlier comment you say turkey can hit two week if the clothes are ready bagged and washed so yeah two weeks if we miss out the production bit this time! Ha) but I’m helping you understand valuation and multiples and Asos 33% own brand with 0 growth is not appealing! Amazon and it’s reseller offering will only gain traction. Why not get your northface jacket same day rather than next on your amazon prime!

You guys are right we will be bidding for specific assets and the rest will fall away. My concern in relation to the pension liability is I think this potentially strengthens Mike Ashley’s hand as the promise of continued trading and a turn around would be the biggest PR win for administration and I would imagine he’d present a rather bullish upside model which showed over a period time he could tame the pension and return to profits (this would probably be incorrect and would just kick the can down the road and further damage the Topshop name). A boohoo one off payment for the brand will need to be sizeable to compete against the slice of bull Mike might serve but he does have a turn around record and if he dropped a wack of cash on day 1 it could look like a sweet deal

Topshop for me is a key buy and boohoo need this to complete the brands to cover from millennials to GenZ. PLT and boohoo were slow on Tik Tok and Shein has gain immense share. Topshop can be positioned as a move vanilla brand that meets a less “edgy and urban” consumer that Shein have hovered up here and in the US. Warehouse and Oasis can then be pushed as direct competitors to Primark. Following Topshop I’d like to see acquisitions or new pushes into Europe as sales in France and Germany etc are still low

Just to add the Topshop brand isn’t broken and the stores are always full it was just the model and slow reaction via supply chain (ragtrade should sell them some
Asos time travelling lorries!) and also a poor push with social influencers. Boohoo group needs to take back tik tok!

I pray some PR comes out soon on Sheins supply chain!

@mattyboy I doubt we will Topshop as a going concern instead we will just be acquiring the name and brand. The shops will be wound down in the admin vehicle

My view for the brand name would be a fairly sizeable amount as the administrators will be very conscious of the pension deficit and this could be a PR nightmare for the administrators if they don’t get decent value.

I think £100m if a fair value when you consider we paid c.£10m for warehouse and oasis which are no where near Topshop. I think this is a game changing acquisition for boohoo

@ragtrade how is my knowledge of Asos plucked from thin air when I have supported I have said with links to third party sources (initially an FT article, then a JP Morgan note and then a industry paper). You are the one who are saying Asos can turn things around (if you count the part from when the clothes are made). You haven't provided any evidence of how asos can turn it around in two week from an on screen design in the UK particularly as you yourself say it takes a week transport from Turkey so actually it is you who is plucking the two week idea from thin air and aren't able to support it or explain how they do the first part in only a week

The point re Amazon is certainly true and Asos numbers reflect that. Asos last year posted a 20% rise in revenue and Amazon can stock all of the c.850 reseller brands. Over time this will become a drag for Asos as all of these 850 brands will have Amazon stores and Amazon bundle clothes with other items. Amzon own clothing might not be worthwhile but the third party brands leaves 66% of Asos business exposed

In terms of Asos own brands the 2019 annual statements show sales of +£1bln (pg 23) the 2020 annual accounts show sales of "over £1bln" (page 13). So it hardly feels like (as you claim) they are ahead of trend and pumping the items out when boohoo own lines grew +40%. Yes some of Asos "new" accounts grew in rather exciting percentage terms but they were off low bases so the %'s flatter. In total though the sum movement of Asos own brand was sort of pedestrian

Above are statements and facts not plucked from the air. So try and respond with some (finally) when you make your point

Asos go from design on a computer to delivery in two weeks and a week of that is transportation? You're just wrong is all I'm saying. Even more you have to factor in your monitoring of the third party brand trends that they have sold - that alone could be 4 weeks before you spot the trend or have reasonable sum of data to conclude its a trend by that point a chunk of your customers have already bought the low margin third party altenative so Asos losses out

https://fashionunited.uk/news/fashion/boohoo-asos-missguided-pave-the-way-for-ultrafast-fashion/2017052424625#:~:text=According%20to%20the%20report%2C%20Boohoo,most%20traditional%20fashion%20retailers%20follow.

Here is analysis from 2017 showing Asos average is 6 weeks and Boo is 2. Given Asos have further left Leicester you can say the skew has shifted further to high end

Asos isn't an aggregator it is reseller. Aggregator means you collect and own the brands they sell they do not own Ralph Lauren or The North Face. Boohoo is an aggregator of brands as we acquire brands and only sell those

My points are 1) being a reseller isn't good it's bad as
- lower margin on third party products
- you miss the opportunity to sell your own higher margin goods
- brands can drop you
- Amazon can blow you out of the water

2) shorter lead times and being the fashion trend mean Boohoo are out of gate a lot faster than Asos so we win sales

Both of these refer to my initial point that Gymshark is a better comparator for this business

I don't know her exact title only what it is now and the position was similar - i thought you claim not to be about the semantics?

So let me understand you point it can come here in two weeks if the garment is ready sealed and washed ie made? That's not the full story and misunderstands the test and repeat model. The two week extension JP Morgan is talking about is starting the clock at inception ie a drawing on a computer and go! I could claim PLT have a lead time of 3 minutes if I ignore the process and just count the time it takes the driver to walk down from the gates.

Boohoo are two weeks quicker at present all in and you have to be considering all in when you do own brand as you have to design it, source the material etc.

@Ragtrade you work in the clothing supply industry? Can you help me understand how you think "Asos can turn goods around in 1 week from Turkey and 1 week by road" when JP Morgan state

"Boohoo has already demonstrated its ability to roll out “test & repeat” internationally with the majority of its sourcing (60%) now coming from overseas. If it were to shift the remaining UK portion to an international supplier base we think the cost benefit (c.140 [basis points] of gross margin) would likely offset any incremental clearance drag from (slightly) slower lead times (c.2 weeks). We see short term disruption as the biggest risk of a sourcing shift”

So Boohoo moving to Turkey would add two weeks but you think Asos can do it in two weeks? So at present are Boohoo manufacturing in a day?!

As mentioned my colleague is the ex Head of Supply Chain at Asos and stated they are about two week behind Boohoo but they weighed that against being in Leicester. Can you help me understand how Asos now do this or did you just make up two weeks?

go on tell us where I'm misguided we are supposed to help each other after all

Boo follow high end fashion trends not the middle of the road. Asos now have trying to follow but due to overseas supply chain they follow at a slower pace

Go on tell me which of Asos's brands is the real trend setter! And even if it is the point remains that people are buying that trend brand over Asos own

When you are 66% reseller you're a reseller shall we put a line under this there?

Selling other brands isn't a strength as it pulls away from your own brands (hence why they only sell 33% own brand and are trying to push this up) further to the FT article before it is a concern of analysts that Asos have such dependence on third party brands

In terms of your view that it gives Asos an edge in spotting trends is again misunderstanding fashion. The trends come from the high end brands such as Balenciaga and Gucci etc and then we copy. Boo have the advantage here as using leicester gives us a two week lead time advantage over asos (my college is a the previous head of supply chain at Asos and admits not using Leicester made speed a disadvantage for Asos). Furthermore what Boo and PLT have done have actually become fashion ie through influencer collections or celebs wearing gucci and plt at the same time.

Of Asos' c.850 distractions none of them are particularly at the forefront of fashion but just rather nice middle of the road clothes serving the vanilla. Boo sets trends and I see your point here that this could fade but we copy faster than anyone else also. Additionally a lot of boohoo and PLT product is now without branding on it so that makes it more staple fashion for longevity

@ragtrade. I didn't want to get into semantics either but that happens when people infer things which aren't said. But good to see you agree now :)

I just thought it was worth clearing up your misguided point that Asos was similar as it's largest brands are Asos own but taken as only 33% of the business it appears you fail to see the total picture and fundamentally where these businesses differ (for now)

Asos selling own brand is a distraction better both sell own brands at higher margin. The beauty of brand power is if you want PLT as it's the hottest thing to have you have to buy PLT. Why then stock a warehouse with c.850 brands which potentially take away the higher margin sales?

So as to my earlier point better to look to Gymshark to where this could be in terms of value

@Ragtrade - yes so they have seen that growth in all those areas and it is only 33% its a third the same business as us. In my initial post I didn't say Asos was exclusively a reseller but when your business is 66% reseller that makes you a reseller. They are trying to catch up to own brand as they have realized the error and risk of reseller

I also didn't say Asos own brands weren't strong (second thing you seem to have dreamt) but that it is not the core business as it is only £1bln of a £3bln business.

Please read more carefully next time and try not to infer

@ragtrade £1bln of Asos revenue came from their own brands out of £3.3bln of revenue (FY20 annual report) - that's only 33%. Their operating margin is significantly lower due to the sale of third party brands

"Ben Hunt at Investec points out that the growing prevalence of third-party brands on the Asos website, such as Topshop from next month, will dilute profitability, since they carry lower margins than its own Asos Design range"
https://www.ft.com/content/94b6d062-c580-11e9-a8e9-296ca66511c9

They aren't the same business model. Asos could face competition from Amazon for 60% of their business. We only sell our own brands so as long as the brands stay in demand there is no competition as we control all of our (much higher margin) product