ASOS
ASOS spent £90 million on a warehouse built to ship 4.5 million units a week. So why was it standing empty within two years?
ALL BREAKDOWNSTHE BREAKDOWN
8/6/20266 min read
ASOS spent £90 million on a warehouse built to ship 4.5 million units a week.
It was meant to carry the business to £7 billion a year.
So why was it standing empty within two years, at barely a third of that number?
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THE SETUP
In 2019, ASOS signed the lease on a new automated warehouse in Lichfield. There was no break clause in the contract.
That £7 billion target wasn't a wild guess. ASOS had nearly doubled revenue between FY16 and FY19, from £1.44 billion to £2.73 billion, all before anyone had heard of Covid. Keep that pace going and £7 billion within a few years was roughly where the trend was already heading.
Even so, FY19's own results flagged warehouse and supply chain strain, the same year operating profit fell from £101.9 million to £35.1 million despite rising sales. Operationally ASOS could not keep pace with the rapid sales growth.
Then Covid hit and for a while it looked like proof the plan was right. Revenue jumped to £3.91 billion by FY21. The Lichfield lease was already signed by then, so the pandemic didn't create the £7 billion ambition, it just seemed to confirm it.
But a lot of that jump was existing demand pulled forward, shoppers doing years of spending in one go because the shops were shut. Once they reopened, demand didn't just slow down. It dropped below the old trend, because some of that spending had already happened during covid.
Lichfield opened in November 2021, built to ship 4.5 million units a week. Staffing matched the ambition: about 700 people on day one, meant to reach 2,000 within three years. The local MP turned up for opening day
Revenue peaked at £3.93 billion that same year, then fell every year after, down to £2.48 billion by FY25, barely a third of the number the warehouse had been built around. ASOS mothballed the site in November 2023, cutting all 700 jobs. They then sold it to Marks & Spencer in 2026 for £67.5 million, a fraction of what it cost to build.
This wasn't a post-pandemic hangover. The growth rate was real before Covid, and the pandemic seemed to prove it. But ASOS signed the contract before it had any chance to check whether that growth rate would actually last.
Signing a lease like that is a bet, a bet that the growth rate holds for as long as the contract runs.
Three decisions explain what happened next.
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THE PLAYBOOK
1. The warehouse lock-in
Lichfield had no break clause. ASOS was committed for the length of the contract. The target it was built around needed roughly 80% more revenue than ASOS ever actually managed. It peaked the year the warehouse opened and never got close again.
The staffing told the same story: 700 people on opening, a plan to reach 2,000 within three years. Instead the site closed within two years, taking roughly the 700 jobs it opened with.
CEO José Antonio Ramos Calamonte later admitted the 2019 decision had been locked in with no way out. Two years was enough time for demand to fall back to where it came from. It was nowhere near enough time to get out of a warehouse.
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Takeaway: if you can't break the contract, don't sign it against your best-case number. Sign it against your worst one. You're the one covering the downside for the whole length of the lease, not the upside.
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2. Free returns
For years, ASOS built loyalty on free, no-questions returns. It worked, shoppers loved it. But it also meant the warehouse had to do double the work. Every item that came back had to be checked, restocked or written off, then often sent out again to another customer. A sale wasn't one trip through the warehouse. Half the time, it was two.
In June 2022, ASOS warned that return rates were climbing back toward pre-pandemic levels. Shares fell 32.5% in a day. Why? Distribution costs had gone up, mostly because of returns. By October, profit was down 89% to £22 million.
Fewer orders were coming through, so the warehouse had more space than it needed. At the same time, each order that did come through cost more to handle, because more of what shipped out came straight back in.
Less demand and higher costs per sale, at the same time. That's what broke it.
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Takeaway: a generous returns policy and a warehouse built to a fixed size can each work on their own. Combined, they don't. If returns go up, the warehouse needs more room and more staff to cope. But the building doesn't get any bigger. So costs rise while the space stays fixed.
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3. Getting out of a warehouse takes longer than building one
Lichfield opened in November 2021 and was mothballed by November 2023. A similar, bigger version played out at ASOS's Atlanta site in the US. Closing a warehouse isn't one decision, it's four: write off the stock, announce the mothballing, find a buyer, then sell. Each part of that process take time, years.
CEO Ramos Calamonte's own diagnosis was blunt: excess stock was “exacerbated by poor operating practices, we were too slow and inefficient.” FY23 alone included a £133.2 million stock write-off inside £226.4 million of adjusting items.
Atlanta cost ASOS a further £190 million, written off as a loss. Both Atlanta and Lichfield had their value written down to zero on ASOS's books years before either site was actually sold.
Add it up: sales were falling, returns were rising again, the warehouse was built for twice the volume it was actually getting and the costs stayed fixed either way. Put all four together and profit didn’t just dip, it disappeared.
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Takeaway: fixed costs cut both ways. They boost profit when sales are rising, and they hurt it just as fast when sales fall. It's always quicker to build capacity than to get rid of it.
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ONE MORE THING
The £3.95 fee applies to customers whose historical return rate is 70% or higher (based on order value); those customers avoid the fee only if they keep at least £40 worth of a given order, which means it's aimed squarely at the customers costing the warehouse the most to process.
£2.5 billion a year should still be a healthy business. Plenty of retailers make good money on that much revenue. ASOS couldn't and the reason is simple: its costs were still built for a £7 billion business, not a £2.5 billion one.
Once ASOS cut costs down to match its real size, the results proved it. By FY25, gross margin rose 370 basis points and EBITDA jumped over 60% to £131.6 million, even though revenue was still falling. Same size business, smaller cost base and suddenly it was profitable again.
In 2026, the headlines said ASOS made money selling the Lichfield and Atlanta sites, £85 million on one, £78 million on the other. That's technically true, but misleading.
Both sites had already been written down to zero value on ASOS's books years earlier. Once something is worth zero on paper, selling it for any amount at all counts as a profit, even if the original investment was a total loss. So those "gains" aren't a sign of recovery. It was an old loss showing up in the accounts.
Add up the actual losses from FY23 to FY25 and the total comes to nearly £1 billion, only around £300 million of which was the direct write-off on the two warehouses. Lichfield wasn't the whole disaster. It was a very visible part.
All of this was happening while Shein was growing fast and doing the opposite. Shein doesn't build big warehouses upfront. It makes small batches, sees what sells and only makes more of that.
It barely carries any of the fixed costs ASOS was stuck with. So while ASOS was writing off stock and shutting down sites it had over-built, Shein could undercut it on price without any of that risk sitting on its books.
If there's one lesson here for any CEO: don't build capacity around the growth rate you're hoping for. Build it around the worst case you could actually survive.
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THE PAPER TRAIL
Should Fashion Retailers Adopt a Test and React Model?
4 minute read
An industry-wide investigation into whether Shein-style "test and react" buying is realistic for legacy fashion retailers, using ASOS's early pilot as the central case study.
https://www.drapersonline.com/news/should-fashion-retailers-adopt-a-test-and-react-model
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ASOS Plc Future Performance Analysis
7 minute read
An independent equity model projecting ASOS's revenue and EPS trajectory through FY28-29, arguing the turnaround still leaves ASOS as "a smaller, more focused, but low-margin" retailer with no clear growth catalyst
https://koalagains.com/stocks/LSE/ASC/future-performance
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Not Dead Yet! Signs of E-Commerce Life at ASOS
4 minute read
A 2025 interview-style piece with CEO José Ramos Calamonte explaining Test & React mechanics in his own words, including how 50% of ASOS Design knitwear now runs through the model.
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