If the holy grail of finance directors is continuous double-digit growth, a
hefty cash pile and zero debt then that explains the relaxed demeanour of Jon
Kamaluddin, finance director of internet clothing store
On a tour of ASOS’s offices on the second floor of a former tobacco factory
in north London, Kamaluddin strolls along with the contented, proud manner of a
father showing off his fast growing brood.
‘This was the size of our original warehouse,’ he says poking his head around
a room roughly 3,000 sq ft stacked high with the latest fashions in shoe,
clothes and the all-important accessories, bags, scarves and belts. Seven years
on and the company is currently moving into a warehouse measuring 158,000 sq ft.
Floated on AIM in 2001 by co-founder Nick Robertson,
ASOS has annually exceeded
all investor and analyst expectations and in 2003 became the UK’s second most
popular online fashion store behind Next but ahead of TopShop a position it
still holds today. ‘The gap between us and Next has been narrowing, while
between us and Topshop it’s been widening in recent months,’ says Kamaluddin.
Originally known as ‘As Seen on Screen’, the business is now more commonly
known by its acronym ASOS, shorter, sharper and neater reflecting perhaps a
change in its clothing lines. Where once it marketed itself hard with cheaper,
copycat outfits of originals worn by the likes of celebrities Paris Hilton,
Sienna Miller and Mischa Barton, it has now expanded to offer own brand products
and luxury branded items.
In its most recent accounts, ASOS reported revenues up 116% to £42.6m with a
pre-tax profit of £3.4m, up 144%, and 1.3 million registered users. It now has
as many as six analysts watching their stocks a clear sign of its success
and all its brokers recently upgraded their forecasts for the year ahead.
Organic is better
So far growth has been 100% organic. Kamaluddin doesn’t rule out acquisitions
as a possibility in the long-term but in the immediate future he sees little
need to acquire, given that the UK clothing market is worth £45bn, and ‘we don’t
need much of that to continue growth’. That’s not even factoring in expansion on
the international scene.
This success has, of course, a lot to do with timing and the penetration of
broadband internet and admittedly it’s much easier to grow a new company than it
is to maintain high growth once you’re established. Nevertheless you can’t deny
the ingenuity of the business and the vision of its directors.
‘We are in the right place at the right time. The internet is growing very
rapidly and online retail is growing at 30-40% and has done for the last three
to four years. But we have delivered on average 80% growth a year,’ he says.
Customers want convenience and choice and the ASOS brand is clearly
delivering to achieve such fast growth and high visitor levels. The site
attracts two million shoppers a month, launches 200 new items every week and
offers more than 5,000 products at any one time across womenswear, menswear,
footwear, accessories, jewellery and beauty.
In addition its target audience of 16 to 34- year-olds have grown up with the
internet and aren’t so hung up on trying things on in stuffy changing rooms.
Moreover the returns policy is clear, effective and efficient. What more could a
Kamaluddin says he’s a risk taker in comparison to the traditional
accountant, but ironically within the business he presents the more cautious
face of its directors.
They have taken some bold moves at times, ‘investing ahead of the curve’ by
recruiting top people before they actually need them, allowing them to move fast
when the risk pays off. Financially Kamaluddin ensures he maintains a balance by
ensuring fiscal stability in a fast growing business: ‘The business has no debt.
It’s cash generative. We have a cash balance and for our growth cycle that’s the
Caution, and the ability to look ahead, doesn’t only extend to finance
either. The directors have chosen their non-executives well, including the
Williams, former Selfridges FD and current CEO of Alpha Airports Group. Williams
is chairman of both ASOS’s audit and remuneration committees.
For a young FD, Kamaluddin, 34, has exceptionally broad experience in
accountancy and business and it is this he puts down to his clinching the job.
He began his career at now defunct accountancy firm Arthur Andersen further
proof that the demise of the firm had little adverse impact on many its staff
spending the first five years in corporate recovery dealing with distressed
businesses, which were either in insolvency or on the brink.
‘I spent a lot of time doing investigations on behalf of companies and
bankers, looking into the prospects of a business, at what cash flow was like
and recommending remedial action. It was a fantastic way to start a career.’
Kamaluddin then went to Marks & Spencer where he spent three years
working on the George Davis brand Per Una a business created from scratch,
which hit £200m in turnover: ‘Again that was an intense experience for a short
period of time and gave me exposure to something entrepreneurial and fast
moving,’ he says.
Red hot fashion
Not one to hang around, he then moved to a small start-up, which he helped
float on AIM in 2004, paving the way for the perfect step up to FD of a fast
moving public company. Cue the ASOS position. It was his blue-chip and Andersen
experience that first impressed CEO Nick Robertson, he believes.
But the company’s trajectory hasn’t always followed a smooth path. ASOS’s
warehouse, among other businesses in Hemel Hempstead, was seriously affected by
the Buncefield blaze, which took fire fighters two days to put out. Yet the fire
failed to torch the business’s growth. The cash reserve the business enjoys has
not only allowed it to come out fighting after disasters such as Buncefield, but
has also given it much more room for manoeuvre, which will come in handy in the
coming years as the economy wavers.
If, as is expected, the business continues to grow, its three biggest
investors: Bill Currie, a private investor; ASOS’s CEO Nick Robertson; and
Fidelity, holding together almost 40% of shares, will be rubbing their hands in
On almost every measure the business is far bigger than three years ago in
terms of staff numbers, warehouse and office space, sales, cash balances, profit
and, of course, the finance team, which since Kamaluddin became FD has grown
from one person to 12, and he’s still looking to recruit.
While accountants across industries are shifting uncomfortably with the
economy threatening to nose dive, in the world of online clothing Kamaluddin is,
for now at least, sitting pretty.
Dressed for success
The UK clothing industry is an incredibly aggressive marketplace dominated by
only a handful of brands. It is worth £45bn and is growing annually at an
average rate of between 30% and 40%.
Despite being a relatively small outfit, in terms of turnover, compared to
the likes of Topshop and Next, ASOS’s business model is well placed given that
according to Internative Media in Retail Group, total online spend in the UK is
expected to grow by 30% in 2008. Women’s, girls’ and children’s clothing account
for the major share of the market, making up 68.7% of the total value, which
offers an additional advantage to ASOS, as its biggest sellers are womenswear.
According to a research report from Infomat, as fashion clothing retailers
continue to find trading conditions difficult in the face of weak consumer
demand and heavy discounting. Marks & Spencer, Arcadia Group, BHS Ltd, and
Moss Bros Group are among those struggling to maintain their position. Those
thriving however include discount chains such as Matalan, Peacock’s and Primark
Stores, which are expanding rapidly and are predicted to increase their market
Nevertheless, we are entering a much tougher economic period and the latest
update from the British Retail Consortium shows that UK retailers saw consumers
cut their spending ‘in earnest’ in February. Clothes sales were lower than a
year earlier for the fifth month in a row, ‘despite continued discounting and
Stephen Robertson, director general of the BRC, said the figures illustrated
that both retailers and consumers were being squeezed by sharp rises in utility
bills and fuel costs.
In its favour ASOS has the
ability to rely on its cash reserves, its agility to adapt to changing market
conditions because of its size and fewer overheads because it’s primarily an
online business. FD Kamaluddin isn’t ignoring the signs however and is
monitoring economic events closely.
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