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Asos issues profit warning over fashion discounting | Asos issues profit warning over fashion discounting |
(35 minutes later) | |
Online fashion retailer Asos has warned of lower profits this financial year after "unprecedented" discounting hit its trading in November. | |
Despite sales growth of 14% from September to November, it had seen "a significant deterioration" in November. | Despite sales growth of 14% from September to November, it had seen "a significant deterioration" in November. |
Economic uncertainty plus weaker consumer confidence had led to "the weakest growth in online clothing sales in recent years". | Economic uncertainty plus weaker consumer confidence had led to "the weakest growth in online clothing sales in recent years". |
"As a result, we have reduced our expectations," the firm said. | "As a result, we have reduced our expectations," the firm said. |
Asos shares fell 35% in early trading. | |
Chief executive Nick Beighton said the fashion industry was currently experiencing an "unprecedented level of discounting, something I've not seen before". | |
In a conference call with industry analysts, he said consumer confidence was "fragile". | |
Asos had previously forecast sales growth of 20-25% in the year to August 2019. However, it now expects just 15% growth. | |
Its anticipated earnings margin was also revised down, from 4% to 2%. | |
Bleak trading | |
"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," Asos said. | "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," Asos said. |
"There has been a high level of discounting and promotional activity across the market. We have increased our own level of promotional activity, leading to a higher discount and continued high clearance mix. | "There has been a high level of discounting and promotional activity across the market. We have increased our own level of promotional activity, leading to a higher discount and continued high clearance mix. |
"This increased discounting, coupled with the unseasonably warm weather during the last three months has reduced our ASP [average selling price], which has not been compensated by higher units per basket." | "This increased discounting, coupled with the unseasonably warm weather during the last three months has reduced our ASP [average selling price], which has not been compensated by higher units per basket." |
Outside the UK, Asos said trading conditions in Germany and France, which account for about 60% of its EU sales, had become "significantly more challenging". | |
Over the three months to 30 November, total group revenue was £656m, up from £576.7m in the same period last year. | |
Asos's bleak assessment comes after Sports Direct boss Mike Ashley described trading in November as "the worst on record, unbelievably bad". | |
"Retailers just cannot take that kind of November," Mr Ashley told analysts last week. "It will literally smash them to pieces." |