Asos issues profit warning after “significant deterioration” of sales

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Asos homeware

Asos has issued a profit warning after sales throughout November came in “significantly behind expectations”.

In a first quarter trading update to investors this morning, the online fashion retailer said that although trading over September and October was “broadly in line with expectations”, November’s performance was cause for concern.

Despite sales growth of 14 per cent over the quarter, it added that it “experienced a significant deterioration in the important trading month of November and conditions remain challenging”.

The news sent Asos shares plummeting 36 per cent in morning trading.

In light of this, the fashion giant reduced its expectations for the financial year to August 2019, anticipating sales growth of just 15 per cent, compared to previous estimates of between 20 and 25 per cent.

It also halved its predictions for its full year earnings margin from four per cent to two per cent.

This will come as worrying news for the UK retail industry, which has largely seen pureplay online retailers like Asos escape generally unscathed by the troubles facing the high street.

In an attempt to counter the retail storm, many retailers have been expanding their discounting and promotions activity, leading Asos to follow suit and reduce its profit margins.

“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 online retailer said.

“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.”

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