ASOS in suprise sales warning ahead of Christmas
ASOS has warned of slowing sales in the run up to Christmas, as the UK-based online fashion retailer issues a “significant deterioration” in sales growth.
The online fashion retailer said in an unscheduled trading update it had been forced to join a markdown frenzy at a time when the wider high street is already suffering the effects of weaker consumer confidence in the run-up to Brexit.
Shoppers were also more cautious in many of its other major EU markets, ASOS said, including Germany.
France, which has suffered five consecutive weekends of sales disruption because of riots, was also hit by tougher trading.
Asos markets itself as the fashion destination for twenty-somethings.
ASOS reported a 14% rise in total retail sales for the three months to 30 November – with UK sales up 19%.
However the company said that its sales growth had come at a cost to profit margins and was sharply down on its earlier expectations.
The chain said it was now forecasting sales growth of 15% for the year to August, down from 2% to 25%.Its anticipated earnings margin was revised down from 4% to 2%.
Shares fell by almost 40% when the market opened while other fashion retailers, including Next and M&S, were leading the fallers on the FTSE 100.
The ASOS statement read: “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.”
The company’s trading update suggests few are immune to the trading troubles.
Primark – like ASOS – has been a consistent performer in recent years but the high street fashion favourite warned investors 10 days ago that November sales had proved “challenging”. Sports Direct and House of Fraser boss Mike Ashley is another to have spoken extensively on the high street’s struggles.
ASOS had delighted the market when, in October, it announced a 28% surge in annual pre-tax profits despite demand headwinds and had predicted even better things to come.
Chief executive Nick Beighton said on Monday: “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”.