- Unofficial guidance flags further profit disappointment
- Cost of living crisis crimping sales growth
- Management under fire for possible selective disclosure
Shares in ASOS (ASC) fell more than 7% to a 10-year low of 635.5p following an article in The Sunday Times. The newspaper reported that the online fast-fashion retailer has privately briefed City analysts that pre-tax profits for the year just ended will be at the lower end of the £20 million to £60 million range given in June.
That range was well below the prevailing consensus of £92 million at the time.
Clearly feeling the squeeze from soaring costs and with cash-strapped shoppers are cutting spending on non-essential clothing and returning more products, ASOS also reportedly told analysts that sales growth in the new financial year is likely to be below consensus at a pedestrian 9.8%.
According to The Sunday Times story, a source close to ASOS stressed pre-close calls were routine and no non-public information was shared.
LONG LINE OF NEGATIVES
Nevertheless, this selective briefing storm is the latest in a long line of negatives for the website for fashion-loving 20-somethings.
Shares in ASOS have cratered on a string of profit warnings, the departure of CEO Nick Beighton and then the news finance director and chief operating officer Mat Dun is also stepping down.
Sentiment towards ASOS has also soured following the launch of a Competition and Markets Authority (CMA) probe into ‘green’ claims and complaints from suppliers over cancelled orders, although one positive is the retailer has ended its search for a new CEO after appointing Jose Antonio Ramos Calamonte to the hot seat.
WHY SHORE CAPITAL IS A SELLER
‘While it is customary to entertain pre-close chats’, said Shore Capital, ‘and the company stated that no non-public information was shared, we are concerned about the potential of selective disclosure.
‘According to the article, one analyst anonymously expressed unease at how ASOS was managing expectations.’
The broker added: ‘Whilst market expectations in aggregate have not necessarily been adjusted, we would be very worried about the basis for an orderly market in the group’s shares as discussions and research notes around forecasts were evident from deliberately selective conversations with analysts.
‘As a result, we would take a very dim view of the possibility, never mind the reality, of such behaviour and reiterate our sell rating.’
