Shares in British retailers plunge as ASOS profit warning stokes fears that online sellers and the High Street are both facing a crisis Christmas

Asos shares crashed 40% to 2,480p after it issued a profit warning Sales rose 14% in the three months but were poorer than expected in November 'If Asos is finding it tough then every retail stock has problem,' analyst say Next, M&S, Primark owner ABF, Carphone Dixons and more see shares slide

18 December 2018 - 09:28

A profit warning by stock market darling Asos has caused a big sell-off of retail stocks today amid fears that both online retailers and the High Street face a disastrous Christmas.

Shares in Asos crashed 40 per cent in early trading today after the online fashion giant said it suffered a 'significant deterioration' in sales in the crucial run-up to Christmas.

In an unexpected trading update, Asos said sales jumped 14 per cent over the last three months, but admitted that trading faltered in 'the important month of November', with conditions remaining 'challenging'.

It has slashed its full-year sales and profit forecasts as a result.

That added to fears of carnage for retailers this Christmas, having a knock-on effect on other high street retailers.

Shares in online rival Boohoo fell 12 per cent - that's despite the firm publishing its own update, in which it said trading is 'comfortably in line with market expectations' following record Black Friday sales.

Other retailers took a hit too: high street bellwether Next was also down about 4 per cent, while Marks & Spencer and Primark owner ABF were down by about 2.6 per cent.

Shares in Mike Ashley's Sports Direct  were down 1 per cent, while JD Sports fell by about 4.8 per cent. Debenhams fell by nearly 7 per cent, French Connection shares fell 4 per cent and Dixons Carphone was down 2 per cent.  

Last week, Sports Direct boss Mike Ashley said November was 'unbelievably bad', and Primark said sales were softer than expected. Meanwhile, Bonmarche claimed the 'unprecedented' conditions were worse than during the recession.

But while the High Street is clearly under the cosh, today's warning from Asos serves as a stark reminder that even online firms are vulnerable to the brutal trading conditions. 

'If Asos is finding it tough out there, then just about every retail stock has problem,' said chief market analyst Neil Wilson.

'We knew the High Street was struggling due to structural shifts, but Asos slashing guidance suggests things are even worse in the run up to Christmas than previously thought for the sector.'

Asos blamed unseasonably warm weather as well as weak consumer confidence in the UK, Germany and France. It added that its sales were achieved through a higher level of discounting and promotions, which will likely eat into its profit margins.

It now expects sales growth of 15 per cent for the year, down from a previous range of 20-25 per cent, and anticipates an earnings margin of 2 per cent, down from 4 per cent.    

Asos now expects sales growth of 15% for the year, down from a previous range of 20-25%

Asos now expects sales growth of 15% for the year, down from a previous range of 20-25%

Asos said: '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.'

Wilson said: 'All of this is adding up to a very rough Christmas and potential carnage for the High Street by the time of the slew of trading updates in early January, although we may hope that some of November's softness was caused by shoppers delaying purchases.

'That is likely to prove a false hope however and we may see a very destabilising period for retail.'

Source: daily mail
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