Second profit warning strips £1.5bn off Asos as shares plunge 40 per cent
Friday 06 June 2014
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.
World's most lethal spider found under a bunch of bananas
Rumours that the star wants to move on to pastures new
TV presenter Fiona Bruce seemed a bit startled by the find during the filming of Antiques Roadshow
Comedian says he 'never laughed as hard as I have writing with Rik'
- 1 Sick elderly man makes 'complete turnaround' after emotional reunion with dog
- 2 Star Wars memorabilia dubbed 'bit of plastic' by Antiques Roadshow's Fiona Bruce valued at £50,000
- 3 Isis fighters 'crucify' 17-year-old boy in Syria
- 4 Ebola cruise ship ‘in utter panic’ as Mexico and Belize refuse to let it dock
- 5 Death of northern white rhino leaves just six of endangered animals left in the world
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Sorry Judy Finnigan – Ched Evans is no less sickening than an alleyway rapist
Residents should throw a street party and mix with immigrant neighbours, councils told
Workers 'could be forced to pay £5 a week' to get benefits
Russell Brand threatened with arrest after filming outside Fox News headquarters
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
iJobs Money & Business
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...
£50000 - £55000 per annum + bonus + benefits: Ashdown Group: IT Relationship M...
Highly Attractive Salary : Austen Lloyd: NOTTINGHAM - BRILLIANT FIRM - You wil...