Online fashion retailer ASOS (ASC:AIM) slumps 41% to £24.63 after issuing a festive shocker of a profit warning, cutting its annual sales growth and margin forecasts amid a fall in consumer confidence and a flurry of margin-crimping discounts.
This earnings alert from the highly-rated web-based fashion wonder suggests trading is even worse than thought in the run-up to Christmas, with difficulties extending beyond the high street, and is hammering shares across the sector.
WHY ASOS HAS WARNED
While trading in September and October was broadly in line with management’s expectations, November, a key month for retailers that includes the Black Friday period, was ‘significantly behind expectations’, reports ASOS.
The AIM-listed giant gives the entire retail sector the jitters with the news ‘the current backdrop of economic uncertainty across many of our major markets together with a weakening in consumer confidence has led to the weakest growth in online clothing sales in recent years. We have recalibrated our expectations for the current year accordingly.’
ASOS not only cuts its year to August 2019 sales growth guidance from a 20%-25% range to circa 15%, but given high levels of discounting across the market, not helped by last month’s unseasonably warm weather, its retail gross margin and EBIT margin guidance are downgraded too, the latter from 4% to just 2%.
CEO Nick Beighton (pictured below) comments: ‘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. We are taking all appropriate actions and our ambitions for ASOS have not changed.’
BOOHOO IN TEARS
The warning adds to fears the festive period will prove a washout for the structurally and cyclically challenged retail sector. ASOS’ close peer Boohoo (BOO:AIM) cheapens 10.7% to 163.4p, despite rushing out its own trading statement in response. Boohoo continues to trade ‘comfortably in line with market expectations’ and assures that its trading performance ‘remains strong, with record Black Friday sales across the group’.
Elsewhere, Sports Direct International (SPD) loses 3% to trade at 228.7p - owner Mike Ashley issued dire warnings about the state of the sector last week - while Primark parent Associated British Foods (ABF) trades 3.1% lower at £21.13.
Also caught up in the maelstrom is Next (NXT), which softens 3.2% to £41.99 as the ASOS warning perhaps provides a negative read-across for its important online business, Marks & Spencer (MKS) is marked down 4.2% to 252.3p and the already-bombed-out Debenhams (DEB) is down 5.3% at 5.1p.
Elsewhere among the clothing retail cohort, Bonmarche (BON), which last week flagged ‘extremely poor’ Black Friday sales, is off 3.75% at 38.5p, fast fashion brand Quiz (QUIZ:AIM) collapses another 13.8% to 29.1p and online women’s fashion brand Sosandar (SOS:AIM) can’t escape the negative sentiment either, its shares sliding 11.6% south to 30.5p.
