Asos faces margin pressure as online fashion becomes less forgiving

It was originally "As Seen On Screen". But in the past year Asos could have stood for "Airborne Stock Only Sometimes". Three profit warnings have buffeted a share price that once seemed to have adopted "onwards and upwards" as its motto. Yet even with that recent history, there is a fan base for the purveyor of fashion to twenty-somethings: first-half pre-tax profit just £1.7m ahead of consensus expectations at £18m prompted a positive share price reaction.

While sales were up, the retail gross margin was down 270bp to 46.8 per cent. The group expects to hold the full-year drop to 100bp and then keep it at the same level next year, as it holds down costs and improves distribution.

Asos is also relying on an increase in volumes of 15-20 per cent this year to enable it to strike better deals all around. Even so, the continuing need to invest in distribution in continental Europe and the US will mean that the improvement will probably be "stop, start" rather than unbroken progress.

Meanwhile, online fashion is changing. Some analysts saw this week's plan for an all-share merger between luxury ecommerce operations Yoox and Net-a-Porter as a defensive deal. Many serious brands are taking more control of their online operations to ensure that their pricing and image are less vulnerable to discounting on third-party sites.

On the high street websites too, brands are improving their own online businesses. Asos says fashion brands selling through third parties as well as their own outlets is nothing new - just think department stores. That does not quite work as an argument for investing in the group. First, a wider choice of third-party sites, such as Next's Labels operation, is becoming available. Second, once you have chosen a potential purchase on a third-party site, it is hardly any effort to click on the branded site to see if it is available more cheaply or even more desirably there. Third, the UK department store model exemplified by Debenhams and House of Fraser has hardly been a beacon of consistent investment excellence.

So even as Asos can claim that profit warnings are last year's fad, it is operating in a tougher environment. At Wednesday's close of £37.35 it is trading on a 2015 p/e ratios of about 80 times. This looks far racier - and far less appealing - than the outfits it sells.

So long, StanChart

Popular activities for those quitting the office in their mid-50s include improving their golf handicap, learning a musical instrument, gardening and travel. Not so, Viswanathan Shankar. Standard Chartered's head of everywhere-except-Asia, is leaving to fulfil his long-held dream to set up a private equity group.

When his gardening leave ends in the autumn, he plans to start fundraising with a goal of achieving up to $1bn to invest in parts of Asia, the Middle East and Africa. In that last location, he may bump up against Bob Diamond, whose joint venture Atlas Mara has raised $600m in London and made three African banking acquisitions.

Mr Shankar's decision has implications for the bank he leaves behind. When the finance director is newish, the chairman is leaving next year, the chief executive is counting the weeks and another executive director the days, those with corporate memory have great value. So Mr Shankar's departure will increase the pressure for Mike Rees, deputy chief executive, to stay while Bill Winters' new regime gets going.

Mr Shankar's exit also means that StanChart comes down to a mere - and mainstream - three executive directors on a 15-strong board. The presence of as many as six executives on the board has become a sore point with investors. Temasek, StanChart's single biggest shareholder, has twice failed to support the re-election of a clutch of executive directors.

Typically, investors worry that an executive-heavy board will struggle to be sufficiently independent of management. Yet this concern is often a symptom rather than a cause. In 2011, for example, when StanChart's share price was at £15-plus, the handful of executive directors was waved back into office with ease.

Still, as Mr Winters begins to turn the bank round, he is likely to welcome anything that eases investor relations.

Less than meets the eye

The longer and more varied the list of signatories, the less substantial the content to which they are putting their names.

So it is that the warning from 103 business leaders about putting the economic recovery at risk, comes to just 119 words, including "Dear Sirs". And it highlights only one policy - their unsurprising (and reasonable) support for lower corporation tax.

If the Tories want a similar letter next time, they will have to find an even more anodyne sentiment if they hope to secure more signatures. Perhaps business types could be invited to express their backing for apple pie?

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