Asos’ profit warning fuels Christmas gloom
November trading ‘significantly behind’ expectations
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Online fashion group Asos fuelled a Christmas crisis in Britain’s retail industry with a profit warning highlighting a major downturn in trading last month, sending its shares 39 per cent lower and unnerving rivals.
The warning from Asos, whose shares fell close to a four-year low, showed that even previously high-flying online-only clothing retailers were not immune to a deterioration in consumer sentiment.
Stocks in other British clothing groups fell on fears of poor trading before Christmas when they do much of their business.
Marks & Spencer was down 2.8 per cent, Next slipped 3.4 per cent, Debenhams lost 6.5 per cent and Primark owner AB Foods shed 2.2 per cent.
UK retailers had been hoping Christmas would revive spending after a torrid year for much of the sector that has seen a string of store groups go out of business or announce shop closures.
But with the sector battling subdued spending, uncertainty over Britain’s exit from the European Union, rising labour costs and higher business property taxes, as well as unseasonably warm weather, analysts predict few winners over the festive season.
“There’s more than Brexit going on here, there is a weakening in consumer confidence and some of that has got good economic reasons behind it,” Asos Chief Executive Nick Beighton told reporters. Asos, which targets 20-somethings, emphasised a high level of discounting and promotional activity across the market and also added that conditions in Germany and France had become more challenging.
Asos cut its sales growth forecast for the 2018-19 year to 15 per cent from 20-25 per cent previously and its earnings before interest and tax (EBIT) margin target for the year to around 2 per cent from 4 per cent.
It also reduced its planned capital expenditure to £200 million (Dh924 million) from £230£250 million previously.