Market Overview

Asos collapsed by 40% due to “terrifying demand”

Asos Plc plunged the most in 4 1/2 years after warning that its Christmas shopping season got off to a disastrous start, showing that Europe’s retail apocalypse is spreading from bricks-and-mortar stores to e-commerce.

The gloomy update from an online retailer that competes with Inc. and has furnished fashions to the likes of Meghan Markle confirms that the U.K.’s retail weakness is widespread in the runup to the holidays. Last week, Sports Direct International Plc Chief Executive Officer Mike Ashley said sales were “unbelievably bad” in November, sending the shares off a cliff.

Asos fell as much as 40 percent early Monday in London, wiping about 1.4 billion pounds ($1.8 billion) off the market value. The news dragged down other online retailers like Boohoo Group Plc, as well as store operators like Marks & Spencer Group Plc and Next Plc. Asos cut its full-year sales-growth guidance on a “significant deterioration” in November, blaming a high level of discounting amid economic uncertainty and low consumer confidence, which has been undermined in the U.K. by the continuing Brexit saga. The news shows that retailers can’t rely on online operations to make up for a decline in stores this year. If December doesn’t improve, the New Year may bring more profit warnings, or worse, to the sector.

Asos cut its outlook for full-year growth to about 15 percent, from a previous range of 20 percent to 25 percent. It’s a sharp turnabout for a company that had grown rapidly, its market value at one point rivaling Marks & Spencer before plunging to 2.1 billion pounds on Monday.

Asos operates in more than 230 countries and territories, with about 37 percent of sales in its domestic market. About half of its business is own-brand merchandise or exclusive collaborations with third-party labels. The company also sells goods from the likes of Hugo Boss, Adidas and Calvin Klein.

U.K. Retail Apocalypse Spreads Online as Asos Plunges 40%, Bloomberg, Dec 17
Article Rating
Rate this post