Fast mode on the slow lane: When Boohoo and Asos fall, M&S and Next rise

Have we reached the pinnacle of ‘fast fashion’? Stocks in online boutiques Asos and Boohoo have fallen out of fashion with crashes.

But on top of the old Marks & Spencer, which has struggled for years to win back its womenswear throne, its stock is on a remarkable rally, having risen more than 80 percent in the past 12 months.

Whisper it, but could we finally see revenge from traditional fashion retailers?

Fashion casualty: Asosshares has lost more than half its value in the last 12 months, falling further this week as the company warns profits may fall sharply

Online operators are under heavy pressure, as this week’s poor earnings warning from Asos is glaringly clear. Boohoo recently reported a similar sad story, with a sharp drop in profits.

Asos, originally called ‘As Seen On Screen’ for selling copies of clothes worn by stars in TV and movies, was founded 21 years ago. It’s having a tough time of adulthood.

Chief executive Nick Beighton is leaving without a successor and chairman Adam Crozier will face a new challenge at BT.

It benefits from switching to internet shopping during the lockdown.

But the stock has lost more than half its value in the past 12 months, falling further this week as the company warned profits may fall sharply in the coming year.

‘The market feels that life has become a bit of a struggle for Asos,’ said Russ Mold, investment director at stockbroker AJ Bell.

The grim update from rival Boohoo, ‘seems to confirm that the fast-fashion industry is not enjoying its best time’, he added.

Boohoo, which was founded by Mahmud Kamani and Carol Kane in 2006 and launched in 2014, has seen a considerable decline.

Before the pandemic, it was priced higher in the stock market than Marks & Spencer. Now its market cap is languishing at 2.4 billion, compared to just under 3.4 billion for a resurgent M&S.

More recently, Asos and Boohoo were seen as the future of fashion retail, with brick-and-mortar stores including Arcadia empire Sir Philip Green and Debenhams playing dinosaurs.

Brexiteer boss Lord Wolfson, Tory partner, runs into conflict with Boris Johnson over immigration policy amid shortage of truckers and warehouse workers

That narrative was reinforced when Asos bought the Topshop brand from Arcadia’s ashes and Boohoo acquired the Debenham name from the department store ruins.

Now, however, it is becoming clear that online operators are facing a number of issues, some of which may be short-term and pandemic-related, others more profound.

These include soaring costs for shipping products, rising wages and competition for warehouse staff, huge increases in energy bills and extra spending from Brexit.

It all adds up to a huge headache for retailers whose business model is based on a quick supply of cheap clobber.

And there is a deeper concern. One is supply chain ethics and the realization that cheap clothing may come at an unacceptable price.

Boohoo vowed to overhaul its supply chain following allegations of unacceptable conditions at Leicester.

He hired retired judge Sir Brian Leveson, who runs the investigation into media behavior, to oversee the proceedings. As for Asos, he proclaims his building credentials, including his own brand in more than 30 sizes to promote body positivity and gender-neutral collections in partnership with leading LGBTQ activist groups.

Even so, the whole concept of fast fashion is increasingly being questioned on environmental grounds, with a move towards buying less, but better.

Teens and twenties may want a new stream of clothing, but many of them also want to save the planet.

The controversy also revolves around the ‘buy now pay later’ tech ethic that is often used alongside online fashion retailers, such as Klarna.

At the same time, traditional retailers have stepped up their game, driven by the pandemic, which has been a huge catalyst for accelerating the use of their technology.

M&S has invested heavily in turning its chain of stores from albatrosses into assets in the battle for online supremacy.

Boss Steve Rowe hopes to be the first major chain to offer same-day fashion delivery nationwide, using nearby stores to pick up and pack clothes and have them delivered to customers’ homes.

He has also posted a curated selection of outside brands and purchases of classic Jaeger brands.

Furthermore, widely regarded as best-in-class, it has increased its profit forecast several times this year and is now expected to hit a five-year high, well ahead of pre-pandemic levels.

Even Next, however, is not immune. Brexiteer boss Lord Wolfson, a Tory partner, is in conflict with Boris Johnson over immigration policy amid a shortage of truck drivers and warehouse workers.

But the company has had success with its mix of online and conventional stores and the ecommerce and logistics services it sells to other retailers.

Not all online fashion companies feel the cold. Shares in Sosandar, a smaller operation aimed at an older audience, were up 61 percent on year.

Boohoo and Asos still have plenty of juice even if they don’t hit their previous heady highs, as Nicla di Palma, senior equity analyst at broker Brewin Dolphin points out: ‘In the years to come, growth will continue, but at a much higher rate. slow .’

But the argument that online fashion is sure to win is too simplistic. Despite the lockdowns, hefty levels of business, tough car parking and expensive rents, the good old British highway style is far from over.