ASOS turns into newest retailer to warn on Christmas gross sales

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Retail shares are taking a pounding after ASOS issued a revenue warning on the again of a “vital deterioration” in gross sales progress.

The web style retailer’s unscheduled buying and selling replace added to fears of a Christmas disaster for UK retailers as ASOS has been one of the crucial constant performers in recent times.

It’s the newest massive identify to warn of the consequences of weaker client confidence within the run-up to Brexit.

ASOS mentioned it had been pressured to affix a markdown frenzy amongst style rivals to drive gross sales throughout its markets – not simply within the UK.

Consumers had been additionally extra cautious, it mentioned, in Germany and France that are additionally struggling injury from slowing economies.

France has endured 5 consecutive weekends of gross sales disruption due to riots.

Asos fashion
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Asos markets itself as the style vacation spot for twenty-somethings

ASOS reported a 14% rise in whole retail gross sales for the three months to 30 November – with UK gross sales up 19%.

Nevertheless the corporate mentioned that its gross sales progress had come at a price to revenue margins and was sharply down on its earlier expectations.

The chain mentioned it was now forecasting gross sales progress of 15% for the yr to August, down from 20% to 25%.

Its anticipated earnings margin was revised down from four% to 2%.

Shares dived by nearly 40% when the market opened whereas different style retailers, together with Subsequent and M&S, had been main the fallers on the FTSE 100.

The ASOS assertion learn: “While buying and selling in September and October was broadly according to our expectations, November, a really materials month for us from each a gross sales and money margin perspective, was considerably behind expectations.

“The present backdrop of financial uncertainty throughout a lot of our main markets along with a weakening in client confidence has led to the weakest progress in on-line clothes gross sales in recent times.

“Now we have recalibrated our expectations for the present yr accordingly.”

The corporate’s buying and selling replace suggests few are resistant to the buying and selling troubles.

Primark – like ASOS – has been a constant performer in recent times however the excessive avenue style favorite warned buyers 10 days in the past that November gross sales had proved “difficult”.

Sports activities Direct and Home of Fraser boss Mike Ashley is one other to have spoken extensively on the excessive avenue’s struggles.



Mike Ashley




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Video:
In full: Mike Ashley on the way forward for the excessive avenue

ASOS had delighted the market when, in October, it introduced a 28% surge in annual pre-tax earnings regardless of demand headwinds and had predicted even higher issues to return.

Chief govt Nick Beighton mentioned on Monday: “We achieved 14% gross sales progress in a troublesome market, however within the mild of a major downturn in November, we predict it is prudent to recalibrate our expectations for the complete yr.

“We’re taking all applicable actions and our ambitions for ASOS haven’t modified”.

George Salmon, fairness analyst at Hargreaves Lansdown, mentioned: “After making spectacular strides in recent times, a difficult client backdrop has lastly tripped ASOS up.

“The fortunes of Home of Fraser and Debenhams are testimony to how powerful retail has been not too long ago, and a revenue warning at European rival Zalando proved on-line gamers aren’t resistant to the problems which have plagued the sector.

“However this information has nonetheless caught the market off-guard.”