Asos slumps on profit alert as retail bloodbath spreads online

The travails engulfing the High Street on Monday spread online, with fashion giant Asos warning on profits.

In an unscheduled trading update, the retailer admitted it was not immune to the difficulties experienced by its bricks-and-mortar peers.

The shock warning sent Asos’ shares tumbling 41%, or 1712p, to 2474p, and triggered a sell-off in other retail stocks. Rivals including Boohoo (down 10.3%), Debenhams (5.8%), JD Sports (5.2%), N Brown (5.1%), Marks and Spencer (4%) and Next (3.1%), all fell.

The alarm comes after Sports Direct’s Mike Ashley warned on Thursday that other big retail names faced “being smashed to pieces” because Brexit jitters stopped shoppers from spending and fewer people bought coats and jumpers in November.

Primark, usually seen as one of the industry’s more resilient names, sent a shiver through the High Street the week before after it warned of “challenging” trading conditions.

Analysts’ now expect other brands to follow suit.

Sophie Willmott, a retail analyst at Global Data, said: “Considering two of the stars of British retail, Asos and Primark, have experienced a slowdown in trade in November, other mid-market players must be in dire straits.”

Clothing brand Bonmarché saw its shares halve last week after it said it will make a loss of up to £4 million next year, down from an expected £5 million profits.

On Monday Laura Ashley said it had too many shops, and plans to cut 40 of them in the UK.

Asos, a former stock market darling, blamed the warning on the unseasonably warm weather in November as well as the “unprecedented” level of discounting by competitors.

Chief executive Nick Beighton said the number of promotions was “something I’ve not seen before”.

He added: “We’ve responded but we’ve not gone as far as we’ve seen in our peer group.”

This wasn’t helped by “fragile” consumer confidence, which meant his customers were spending less or buying cheaper clothes. Sales were poor in France, Germany and Australia too.

Asos previously expected sales growth of 20%-25% in the year to August, but it now forecasts just 15% growth. It slashed its 4% targets for profit margins to 2%.