Asos falls out of fashion after profits downgrade
SHARES in Asos traded close to a 12-year low as investors fretted about the impact the cost of living crisis was having on fast fashion retailers.
The FTSE 250 business tumbled 2.6pc, or 18p, to 667p following reports over the weekend that it had been privately briefing City analysts that its profits for the year to the end of august will be at the lower end of expectations.
In June, the company predicted profits for the year of between £20m and £60m, much lower than its original forecast of between £110m and £140m.
It blamed high levels of customer returns for the downgrade. asos also warned analysts that sales growth for its coming year was likely to fall below the market’s predictions of 9.8pc.
One anonymous analyst said they were ‘slightly uneasy’ about how the company was managing expectations. Meanwhile, eleonora Dani, analyst at broker Shore Capital, said it was worrying for an orderly market in asos shares given evidence of the firm having ‘deliberately selective conversations with analysts’. She added: ‘We would take a very dim view of the possibility, never mind the reality, of such behaviour.’
reports about the scaling back of its forecasts is yet more bad news for asos, which has recently been marred by a series of negative updates including the departure of its finance boss, an investigation by regulators into its ‘green’ claims and complaints from suppliers about cancelled orders.
The profit forecast is also likely to make investors increasingly worried that the outlook for retailers is becoming bleaker.
The sentiment appeared to be weighing on the sector as a whole, with shares in rival Boohoo slumping 2.3pc, or 1.03p, to 43.17p.
retailers both online and on the high Street are coming under increasing pressure as the cost of living squeeze forces people to cut back on spending on non-essential items such as new clothes.
The FTSE 100 crept up 0.09pc, or 6.24 points, to 7287.43, while the FTSE 250 slumped 1.19pc, or 223.54 points, to 18629.68.
Markets appeared to mostly shrug off the election of Liz Truss by Conservative Party members as party leader and Prime Minister, seemingly paying much more attention to the growing energy crisis in europe after russia’s state- backed energy giant Gazprom shut off the key Nord Stream 1 gas pipeline indefinitely at the end of last week.
hargreaves Lansdown analyst Susannah Streeter said the closure was ‘the worst case scenario’ for european leaders and seemed
to show russia was using energy supplies as its ‘big weapon’ in the war in Ukraine.
UK natural gas prices surged by over 20pc following the closure of the gas pipeline, while oil prices also jumped sending Brent crude to over $96 a barrel. as a result, shares in the energy giants received a boost with Shell rising 1.03pc, or 24p, to 2348p and BP gained 2.1pc, or 9.65p, to 463.35p.
Major miners, many of whom earn most of their revenues overseas, were among the biggest blue-chip risers on the back of the weak pound. Glencore gained 4pc, or 18.25p, to 471.5p, Antofagasta added 1.8pc, or 19.5p, to 1121p, Anglo American jumped 0.6pc, or 17.5p, to 2769p and Rio Tinto rose 0.7pc, or 32p, to 4732.5p.
animal drugs firm Dechra Pharma reported a strong rise in profits as it cashed in on higher demand following a boom in pet ownership during the pandemic.
The firm posted a profit of £96m for the year to the end of June, up 16.2pc year- on-year, while revenues rose 13.8pc to £682m. But shares dropped 10.6pc, or 370p, to 3126p, which eToro analyst adam Vettese attributed to concerns about the firm’s ‘lofty valuation’.