NEWS
17/12/2018 07:20 GMT | Updated 17/12/2018 08:16 GMT

Asos Warns Of 'Significant Deterioration' In Trading

Weak consumer confidence has driven down online clothing sales, firm says.

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Asos has warned the City over sales and profits after a problematic November.

Online retailer Asos has suffered a shares slide after it warned over sales and profits following a “significant deterioration” in trading.

The clothing giant said in a unscheduled stock market update on Monday morning that November – which it described as an “important trading month” – had seen much slower sales than expected.

As a result, Asos has reduced its expectations for the current financial year.

It now expects sales growth of 15% for the year to August 2019, down from 20% to 25%, and its anticipated earnings margin has been revised down from 4% to 2%.

PA Graphic
Shares in Asos plunged as the stock market opened at 8 am (GMT) on Monday.

Asos said in a stock market update: “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.”

Asos’ trading update mirrors the words of Sports Direct chief Mike Ashley, who told City analysts last week that November had been “unbelievably bad” and that many retailers would not survive if the month came to signal the longer-term trend on the high street.

Asos pointed to a high level of discounting and promotional activity across the market, leading it to increase its own special offers, which typically eat into profit margins.

Unseasonably warm weather during the last three months has also seen reduced spending by shoppers, Asos added.

However, in the UK, Asos said it continues to “materially outperform”, although this has been achieved at the cost of more promotional activity than initially planned and consumers buying into lower priced product.

Trading conditions across Germany and France, which account for 60% of the retailer’s EU sales, have become significantly more challenging,

Asos added in a stock market update: “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.”