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ASOS fire halts operations

A major fire at ASOS’s Barnsley distribution centre late on Friday night (20/6/2014) has caused it to suspend operations. At the time of writing (the Sunday morning following)  their retail web site was still not available to shoppers with a message saying the company had “pressed pause on the ASOS web site”.  It also suggested they expected to be back in operation in the next day or so. It is believed that the fire might have been the result of arson. It is believed the Barnsley site handles most orders taken by ASOS (not just UK ones), and well as acting as a major distribution centre for the goods.

This is not the first time ASOS has been hit by a fire. Back in 2005 they were out of action for several weeks due to the Buncefield oil storage disaster – Buncefield was adjacent to their distribution warehouse. However the company quickly recovered operationally at the time and were covered by insurance but it did hit their financial figures. The shares were suspended at the time.

This is what finance director Jon Kamaluddin said afterwards “We have always known that operating from one site would be an Achilles’ heel for us, but where do you draw the line? Do you set yourself up in two warehouses and incur the cost of running across two operations, or do you accept that this is a risk in your business model and take out insurance to cover that risk? That is the decision we made”.

No doubt we will see whether they learned from that previous event and how good their disaster recovery plan is. But being out of action for more than  24 hours for an on-line retailer is surely not a good sign.

The share price of ASOS has been falling rapidly since March, particularly after the recent profit warning. It has been one of the most traded AIM shares, and one of the largest companies on AIM. This latest hiccup will no doubt not improve the share price when the market opens on Monday, assuming the shares are not suspended.

Roger Lawson

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