ASOS issues profit warning after weak sales in November

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Online fashion retailer ASOS has issued a profit warning for the full year after experiencing disappointing sales in November. It would seem that Black Friday wasn’t perhaps as successful as it should have been which could be a sign of weakening retail confidence, that is quite likely related to Brexit, isn’t just impacting the High Street but also online businesses. In partcular, ASOS noted that deep discounting had had a detrimental impact on margins in an already touch environment.

At their lowest point today, the stock had lost 42% of value since the opening of the market this morning. The statement was made at 7am and it has had a negative effect on retail shares in general, other retailers also saw prices slide.

Here’s some of the statement:

Whilst trading in September and October was broadly in line with our expectations, November, a very material month for us from both a sales and cash margin perspective, was significantly behind expectations.

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.

As one analyst familiar with the sector said of the ASOS profits warning:

The UK retail sector took a knock today after well-known ASOS shares were battered on the back of an earnings warning. ASOS shares have slumped after the online fashion house announced a profit warning. The group said that sales from September to November jumped by 14%, but there was a ‘significant deterioration’ in November. The company previously predicted full-year sales growth of 20-25%, and now it anticipates just 15%. Profit margins have been revised down to 2% from 4%. Nick Beighton, the CEO, warned that the sector is experiencing ‘unprecedented levels of discounting’.
– David Madden, market analyst, CMC Markets


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