Shock profit warning sees Asos shares plummet 38%

Asos becomes the latest UK retailer hit by crashing stock as it becomes clear that the UK retail industry as a whole is struggling in the face of Brexit, increased discounting and weak consumer confidence

18Dec

After a particularly poor November, Asos became the latest UK retailer to see its value plummet after announcing an unexpected profit warning which saw its share price crash 37.5% to £26.14 ($33.14), wiping £1.3bn ($1.65bn) off the retailer's market value. The news of this crash, which has taken the retailer's stock price to its lowest since September 2015, has spurred fresh fears about the state of UK retail as the country prepares itself for the effects of Brexit.

Asos has blamed the downturn on an increasing level of discounting in retail. Asos chief executive Nick Beighton said: "In fashion we are seeing an unprecedented level of discounting, certainly something I have not seen before, and that’s across the board."

Beighton added that he was "astonished at the level of promotions and discounting, especially around Black Friday". Asos knocked 20% off all of its products in its Black Friday sales events but struggled to compete with its rivals offering much more lucrative deals.

He also predicted heavy discounting would continue in coming months.


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Other commenters have noted that weak consumer confidence and the unusually mild weather have contributed to the overall decline in retail as a whole.

The news has also consolidated suspicions that the struggles the UK high street has faced in recent years has spread to online retailers, as one of its key rivals Boohoo also reported a loss of 20% before clawing it back to 14% after releasing a statement claiming that trading remained strong.

Neil Wilson, chief market analyst at Markets.com, told The Guardian: "If Asos is finding it tough out there, then just about every retail stock has a problem. We knew the high street was struggling due to structural shifts but Asos slashing guidance suggests things are even worse in the run-up to Christmas than previously thought for the sector and the strife extends well beyond the high street.

"In short, online businesses have seemed immune but the warning from Asos today suggests they, too, are at risk from the cyclical slowdown," Wilson concluded.

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