Monday, 4 Nov 2024

ASOS becomes latest retailer to warn on Christmas sales

The online fashion retailer’s unscheduled trading update added to fears of a Christmas catastrophe for UK shops as ASOS has been one of the most consistent performers in recent years.

It is the latest big name to warn of the effects of weaker consumer confidence in the run-up to Brexit. but its statement also signalled there were bargains to be had for price-savvy consumers.

ASOS said it had been forced to join a markdown frenzy by fashion rivals to drive sales across its markets – not just in the UK.

Shoppers were also more cautious, it said, in Germany and France which are also seeing an economic slowdown.

France has endured five consecutive weekends of sales disruption from riots.

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 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 earlier projections of 20% to 25%.

Its anticipated earnings margin was revised down from 4% to 2%.

Shares dived by almost 40% when the market opened with other fashion retailers, including Next and M&S, leading the fallers on the FTSE 100 during the first hour.

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”.

George Salmon, equity analyst at Hargreaves Lansdown, said: “After making impressive strides in recent years, a challenging consumer backdrop has finally tripped ASOS up.

“The fortunes of House of Fraser and Debenhams are testimony to how tough retail has been recently, and a profit warning at European rival Zalando proved online players aren’t immune to the issues that have plagued the sector.

“But this news has still caught the market off-guard.”

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