Asos has changed the criteria for its annual executive bonus scheme in a move that analysts said reflected the sharply declining fortunes of online fashion retailers.
In a notice discreetly published on its website, the group said it was “appropriate” for its remuneration committee to “amend the performance measures and weightings . . . to better align with business priorities [for the current financial year]”.
The weighting for revenue in the current year has been cut from the 30 per cent cited in the company’s annual report, published three weeks ago, to 15 per cent.
Adjusted pre-tax profit has been downgraded from a 30 per cent weighting to 25 per cent while adjusted cash flow now comprises a 35 per cent weighting, up from 15.
The weighting for strategic and environmental, social and governance considerations was unchanged, although within this category, references to active customer numbers, gross margin and personal objectives were dropped in favour of “cost mitigation”.
The bonus scheme applies to chief executive Jose Antonio Ramos Calamonte, who took over from Nick Beighton in June, and whoever is appointed to the post of chief financial officer vacated by Mat Dunn at the end of October.
It can pay out a maximum 150 per cent of base salary and depends on performance against various targets in a single financial year. It did not generate any payouts in respect of the year to August 2022.
A separate long-term incentive scheme uses different metrics and is not being amended.
As is customary across the retail sector, the thresholds that trigger payouts against each of the criteria have not been disclosed.
The changes follow full-year results in October when Calamonte acknowledged that the company needed to shed excess stock and took a provision of up to £130mn to reflect the cost of doing so.
But some analysts took a dim view of the bonus scheme changes, saying the substitution of cost reductions for customer and revenue growth showed how times had changed for pure-play ecommerce retailers such as Asos that boomed during the Covid-19 pandemic.
“It’s very short term,” said one. “They are effectively being paid to liquidate stock and sack people . . . it shows how asleep at the wheel the board was.”
Investors will get a binding vote on the remuneration policy, including the revisions, at the company’s annual meeting scheduled for January 11. One said the changes could be a sign that the company had traded poorly over the key Black Friday period and was having to liquidate stock at deep discounts.
Asos reported a loss for the year to August 2022 and said it expected the economic outlook in the UK to remain challenging, especially for its core 20-something customer base. It has also been hurt by an increase in product returns.
However, it has not issued fresh financial guidance since the results, suggesting that its position on trading and inventory is unchanged.
Asos said that the bonus performance measures and weightings “have been appropriately revised to better align the framework to the current environment and the delivery of our strategic priorities outlined at full-year results”.
“The level of potential earnable bonus has not changed,” it added.
Shares in the company, which moved its listing to the main market at the start of this year, have fallen by almost three-quarters over the past 12 months to their lowest in more than a decade.