Have we hit peak ‘fast fashion’? Shares in online boutiques Asos and Boohoo have fallen out of vogue with a crash.
Yet over at dear old Marks & Spencer, which has struggled for years to win back its womenswear throne, shares are staging a remarkable rally, having risen by more than 80 per cent in the past 12 months.
Whisper it, but might we finally be seeing the revenge of the traditional fashion retailer?
Fashion victim: Asos shares have lost more than half their value in the past 12 months, taking a further tumble this week when the company warned profits are likely to fall steeply
Online operators are facing heavy pressures, as the nasty profit warning from Asos this week shows all too clearly. Boohoo recently reported a similar tale of woe, with a sharp slump in profits.
Asos, originally called ‘As Seen On Screen’ for selling copies of clothes worn by stars on TV and film, was founded 21 years ago. It is having a difficult coming of age.
Chief executive Nick Beighton is leaving without a successor and chairman Adam Crozier is heading off for new challenges at BT.
It benefited from the switch to internet shopping during the lockdowns.
But its shares have lost more than half their value in the past 12 months, taking a further tumble this week when the company warned profits are likely to fall steeply in the coming year.
‘The market had a sense that life has been a bit of a struggle for Asos,’ says Russ Mould, investment director at stockbroking firm AJ Bell.
A gloomy update from rival Boohoo, ‘seemed to confirm that the fast fashion industry was not enjoying the best of times’, he added.
Boohoo, founded by Mahmud Kamani and Carol Kane in 2006 and floated in 2014, has endured quite a comedown.
Before the pandemic, it was valued more highly on the stock market than Marks & Spencer. Now its market cap is languishing at £2.4billion, compared with just under £3.4billion for a resurgent M&S.
Not so long ago, Asos and Boohoo were seen as the future of fashion retail, with bricks-and-mortar stores including Sir Philip Green’s Arcadia empire and Debenhams cast in the role of dinosaurs.
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That narrative was reinforced when Asos bought the Topshop brand from the ashes of Arcadia and Boohoo acquired the Debenhams name out of the department store wreckage.
Now, however, it has become apparent that the online operators face a number of problems, some of them probably short-term and pandemic-related, others more deep-seated.
These include spiralling costs for shipping products, rising wages and competition for warehouse staff, big hikes in energy bills and extra outlays from Brexit.
It all adds up to a big headache for retailers whose business model is based on the speedy supply of cheap clobber.
And there are more profound concerns. One is supply chain ethics and the awareness that cheap garments may come at an unacceptable price.
Boohoo promised to overhaul its supply chain following allegations of unacceptable conditions in Leicester.
It hired retired judge Sir Brian Leveson, who ran the inquiry into the behaviour of the media, to oversee the process. As for Asos, it proclaims its woke credentials, including its own brands in more than 30 sizes to promote body positivity and a gender-neutral collection in partnership with a leading LGBTQ activist group.
Even so, the whole concept of fast fashion is increasingly being questioned on environmental grounds, with a movement towards buying less, but better.
Teenagers and twenty-somethings may want a stream of new outfits, but many of them also want to save the planet.
Controversy also swirls around the ethics of ‘buy now pay later’ technology frequently used alongside online fashion retail, such as Klarna.
At the same time, traditional retailers have raised their game, spurred by the pandemic, which has been a huge catalyst to accelerate their use of technology.
M&S has invested heavily in turning its store network from an albatross into an asset in the battle for online supremacy.
Boss Steve Rowe hopes to be the first large chain to offer nationwide same-day fashion delivery, using nearby shops to pick and pack garments and despatch them to customers’ homes.
He has also installed curated selections from a number of outside brands and its purchase of the classic Jaeger brand.
Next, widely regarded as best in class, has upgraded its profit forecasts several times this year and now expects to hit a five year high, comfortably ahead of pre-pandemic levels.
Even Next, however, is not immune. Brexiteer boss Lord Wolfson, a Tory peer, ran into conflict with Boris Johnson over immigration policy amid a shortage of lorry drivers and warehouse workers.
But the firm has succeeded with a mix of online and conventional stores and an ecommerce and logistics service it sells to other retailers.
Not all online fashion companies have felt the chill. Shares in Sosandar, a smaller operation aimed at an older audience, are up 61 per cent in a year.
Boohoo and Asos still have plenty of juice even if they do not reach their previous heady heights, as Nicla di Palma, a senior equity analyst at broker Brewin Dolphin points out: ‘In years to come, growth will continue, but at much slower rates.’
But the argument that online fashion will inevitably triumph is too simplistic. Despite lockdowns, hefty business rates, difficult car parking and expensive rents, good old British high street style is far from finished.