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Online retailer ASOS drops 11% on warning

ASOS, the online fashion retailer popular among 20-somethings, has warned its full-year sales growth will be at the “lower end” of expectations.

Its shares fell as much as 11% in early trading in London as the company also missed its sales forecast.

Although total retail sales rose 22% to £802.7m in the four months to 30 June, it was below analysts’ expectations of 25.8%, as well as the 27% it reported in the first half.
ASOS expects full-year sales growth to be “towards the lower end” of a 25% to 30% range.
Despite missing the forecast, ASOS and rival Boohoo have benefited as consumers move away from traditional high street retailers in favour of shopping online.
E-commerce now represents 18% of UK retail sales, with struggling brick-and-mortar brands such as House of Fraser cutting jobs and closing stores.
With a market valuation of £5.47bn – exceeding that of Marks & Spencer – ASOS is spending millions on its technology and logistics to take on Amazon.
It will open a new warehouse in Atlanta, Georgia, and the second phase of a distribution centre in Berlin later this year.

Chief executive Nick Beighton said: “As well as managing 22% growth we’re also managing demand around key infrastructure programmes.
“There’s certain quarters where you go for growth and certain quarters where you manage demand around your infrastructure periods – the last four months has been categorised by that.”
UK retail sales rose 23% to £288m, sales in the EU soared 31% to £257.4m, and US sales increased 15% to £108.1m, the company said.
ASOS expects its profit before tax to be in line with consensus forecasts for the year.
Despite the company’s stock falling, analysts were still enthusiastic about ASOS.

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“In our view, ASOS remains a structural winner given the shift online together with its global aspirations,” Greg Lawless, research analyst at Shore Capital, said in a note to investors. He recommends investors buy the stock.
And Sofie Willmott, senior retail analyst at GlobalData, said: “With high investment planned to support growth across the board, ASOS’s international results are not a cause for concern.”

Source: Sky

About Business Ideas UK

My name is Joel Bissitt. I have been an entrepreneur for 24 years and have run many small businesses across various sectors. For the last 10 years I have worked mainly within online media, franchising and small business start-ups.

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