Online retailer Asos lost £1.5 billion of its value today after the former stock market darling unveiled a new profit warning, its second in only three months.
Shares in Asos plummeted as much as 40 per cent, falling to a low of 2529p. They settled at 3124p, still a drop of 31 per cent or 1399p and less than half of the all-time high they hit in February.
Asos’s fellow London-listed online firms were hit by the profit warning, with fashion site Boohoo dropping 9 per cent and online grocer Ocado off nearly 5 per cent.
The previously soaring value of Asos, whose stock had doubled in the 12 months before March’s first profit warning, has been used as a benchmark to justify high share prices for the sector.
Asos chief executive Nick Robertson said he was forced to increase promotions overseas, especially in Australia and Russia, because of a strong pound.
Playing down the warning, he said: “This is just a bump in the road. The reality is clearly not what we’d hoped for. Some factors are within our control some are outside our control. Normally 3 per cent of our sales are on promotion, now it is 8 per cent, but a 5 per cent increase in promotional activity has not been enough to offset 25 per cent changes in currencies.”
Full-year pre-tax profits are now expected to be £45 million, down from a previous prediction of £65 million. Last year profits were £54.7 million.
Australia was hardest hit, according to Robertson, slipping from Asos’s biggest international market to its third in just six months.
Sales overseas, excluding the US, rose just 1 per cent, after years of double-digit growth. In the UK, sales rose 43 per cent and across the group the figure was 25 per cent. Analysts today said Asos had over stretched itself with its expanding lines for women.
“We remain concerned that the ranges in womenswear have been expanded beyond the levels management can adequately control,” said Freddie George, retail analyst at Cantor Fitzgerald, adding: “The company will now have to reduce the number of womenswear lines,” which would have an impact on results.
In March, the company issued a profit warning as bosses said spending on a warehouse upgrade and the high costs of attempting to break into China, would hit sales. Robertson today said the costs for the expansion had not increased and was unapologetic for the high costs.
He said: “Our shareholders are on board. Growth isn’t for free. It involves investment in structure and investment in people.”