Asos to sell Lichfield fulfilment centre to M&S, shares spark

(Sharecast News) - Asos shares sparked on Monday after the online fashion retailer said it has agreed to sell its Lichfield fulfilment centre to Marks & Spencer. It said the disposal marks another step in the structural transformation of the group's financial position, with net proceeds of at least £66m and annual cash cost savings of around £6m.

The Lichfield site had already been mothballed to address excess capacity and Asos said its fulfilment centres in Barnsley and Berlin provide sufficient capacity to support future growth.

Chief executive Jose Antonio Ramos said: "The disposal of our Lichfield fulfilment centre represents a further step in strengthening Asos's balance sheet and improving our capital efficiency. This transaction enables us to unlock value from one of our non-core assets while reducing our ongoing cost base, consistent with the actions we have taken over the past three years to simplify the business and enhance financial resilience.

"Asos is a well-invested business and we have significant capacity to support future growth. We will continue to maintain a disciplined approach to capital allocation as we execute our strategy."

At 0945 BST, Asos shares were up 14% at 247.80p, while M&S was 0.3% lower at 330.70p.

Dan Coatsworth, head of markets at AJ Bell, said: "It's a win-win situation for both Marks & Spencer and Asos, even though they both compete in the same space.

"Asos is in turnaround mode, and its recovery efforts are pedestrian at best, so it doesn't need as much fulfilment capacity as it previously thought.

"The cash injection from selling the leasehold and automation machinery will come in handy as it helps to shore up the balance sheet and Asos will save £6 million a year in rent and associated occupancy costs.

"Marks & Spencer has snapped up a pre-built fashion logistics operation, which should be much quicker to mould into shape than fitting out a warehouse from scratch. Marks & Spencer will have the site up and running by next year, giving it greater capability to capitalise on online sales demand.

"Marks & Spencer is fighting hard to reclaim its crown as the affordable but high-quality fashion king. Its recent cyber-attack knocked the business for six and arch-rival Next took advantage of the situation and hoovered up a lot of M&S's customers. Marks & Spencer is now trying to win these people back and get other customers to do more. Sizing, availability and speed of delivery matter to people, and this is where Marks & Spencer should be able to excel."

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