The former stock market darling Asos lost £1.5bn of its value yesterday after unleashing a massive profit warning, its second in three months.
The internet fashion giant admitted annual profits for the year would be nearly a third lower, blaming heavy discounting on its international websites.
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.
Other 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 year before March's profit warning, has been used as a benchmark to justify high share prices for the sector.
Nick Robertson, the company's chief executive, said he had been 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."
Pre-tax profits for the full year are now expected to be £45m, down from a predicted £65m. Last year's profits were £54.7m. Australia was hardest hit, Mr Robertson said, slipping from first to third place in the retailer's international markets in six months.
Sales overseas, excluding the US, rose just 1 per cent, after years of double-digit growth. UK sales rose 43 per cent and across the group the figure was 25 per cent. Analysts said Asos had overstretched itself building up its lines for women.
"We remain concerned that the ranges in womenswear have been expanded beyond the levels management can adequately control," said Freddie George, a retail analyst at Cantor Fitzgerald.
He added: "The company will now have to reduce the number of womenswear lines," which would have an impact on results.
In March the company had warned that profits would be hit by the cost of a warehouse upgrade and the high costs of trying to break into China.
Mr Robertson said yesterday that the costs of the expansion had not risen and he remained unapologetic about them. "Our shareholders are on board. Growth isn't for free. It involves investment in structure and investment in people," he said.