Home Stock & Shares ASOS shares fall sharply after ‘challenging’ markets hit sales

ASOS shares fall sharply after ‘challenging’ markets hit sales

by Jonathan Adams
ASOS shares

The online fashion retailer updated on trading following a profit warning at the end of last year

Shares in ASOS have fallen sharply after it reported “challenging” conditions in France and Germany and said sales in the US had been hit by teething problems at a new warehouse.

The online fashion retailer said overall revenues in the three months to 28 February – stripping out currency movements – were up by 11% to £658.5m compared to last year, with the UK up 14%.

But the fast-expanding company saw the pace of growth in the EU slow to 8% while in the US, sales fell by 3%.

Chief executive Nick Beighton said France and Germany, the retailer’s two largest markets “continue to be challenging” while the US performance fell short of plans.

Nick said that as their Atlanta warehouse went fully online, demand far exceeded their expectations.

Whilst very encouraging for the longer term, this caused a significant short-term despatch back log which they have now cleared, he added.

Beighton said ASOS was now increasing its investment in price and marketing, particularly in France and Germany, and that it was seeing an improved US performance. He remained confident that the group would meet its profit guidance for the full year to the end of August.

ASOS had issued a profit warning in December as it reported a “significant deterioration” in sales growth.

Senior analyst at Hargreaves Lansdown, Laith Khalaf said the market had come to expect 25% sales growth a year from ASOS, but the company only expects 15% this financial year.

The slowing growth seems to be a result of weaker consumer confidence, while increased promotional activity suggests the competition is heating up too. There’s now a lot of pressure on the next six months to bring ASOS back up to what is a tepid growth rate by its own high standards, he added.

Shares fell as much as 11% following the latest update though later in the morning they had recovered most of the losses, and were trading 2% lower.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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