ASOS shares plummet after profit warning ahead of Christmas
The online fashion retailer said that it is experiencing a ‘drag’ on profitability driven by a ‘deterioration’ in sales, forcing it to increase discounts and promotional activity ahead of the Christmas period.
ASOS saw its shares fall by nearly 40% on Monday morning, tumbling as low as £24.05, after the company issued a profit warning ahead of the Christmas period.
Christmas usually offers the retail sector a major sales boost, but this year ASOS have struggled due to ‘economic uncertainty across many major markets’ coupled with a ‘weakening in consumer confidence’ that has led to the weakest growth in online clothing sales in recent years, the company said in its recent trading update.
High Street woes felt online
A slowing UK economy and weakening consumer confidence has hurt high street retailers this year, but ASOS’ recent profit warning shows that the previously unaffected online sector is beginning to feel the pinch too.
‘We achieved 14% sales growth in a difficult market, but in the light of a significant downturn in November, we think it's prudent to recalibrate our expectations for the full year,’ ASOS CEO Nick Beighton said.
‘We are taking all appropriate actions and our ambitions for ASOS have not changed,’ he added.
In light of the recent profit warning, ASOS revised its guidance for the full year to August and said it expects sales growth of around 15% compared to previous guidance of between 20% - 25%. The company also amended its EBIT margin from 4% to 2%.
Retailers left in the cold at Christmas
ASOS’ tumbling share price on Monday precipitated significant sell-offs at other major fashion retailers.
Next saw its share price fall by more than 3.5% to £41.79 on Monday morning, with Marks & Spencer's stock down 3%, hovering at around 255p a share.
Boohoo.com, one of ASOS’ key competitors, also suffered significant losses, despite attempts to reassure investors, with the online retailer seeing is share price fall more than 10% to 162p a share as of 11:15am GMT.
ASOS intends to next update the market on trading on 15 February 2019.
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