Eggs in one basket...Again.23 Jun 2014 01:36
Before this ASC was also suffering due to strong £ making its goods expensive to overseas customers.
This problem was not insurmountable but would have required a serious shakeup of its global sales and distribution strategy.
IMHO for a global business of ASC revenue it was pure folly to have all global distribution from a single 'fulfillment centre'. This was not a risk averse strategy and potentially also a limitation of the profit growth model. Did anyone at ASC acknowledge this risk? Now with this awful fire we see another down side of eggs in one basket approach. It would be interesting to know how ASC competitors approach storage and distribution of goods. Now, here are some facts...
11 Dec 2005 - Buncefield Fuel Depot explosion closed business for 6 weeks - £5m of stock lost. Christmas trade heavily impacted. The company asked for its shares to be suspended while it assessed the effect of the explosion on its business. Trading resumed on 23 Dec 2005 and fell 2½ to 75p.
In an Interview with Nick Robinson on 30 Jun 2008, the interviewer states that insurance and ASOS risk adverse strategy 'saved the business'.
The Criminal Damage Act 1971 covers offences of damage to other persons property (including by fire). Arson can be broken down to two categories, arson with a 'potential financial gain' and arson as a 'malicious act'.
Commercial insurance policies do not usually specify or include the word arson. They provide cover for fire (amongst other perils) this means that 'any cause of fire is covered'. For example, if a neighbouring property catches fire and this spreads, you are covered.
If you willfully set fire to your own property (assume this also means employees), whether for financial gain or not, you are not covered. Insurance is there to cover unexpected eventualities. You would be covered though if a neighbour willfully set fire to their own property and this, unfortunately, spread to your property.
Future of ASOS will hinge therefore on the criminal investigation and who and why the damage was initiated. The markets hate uncertainty and there are so many ??? at the moment in this situation.
On this basis, I am almost 100% certain trading will be suspended before start of business to prevent biblical SP dive and frantic shorting and selling.
In any case this is a very sad state of affairs for all concerned. My thoughts go out to all those who work at or with ASOS.
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