More than half a billion pounds was wiped off the value of Asos yesterday after the online retailer said that the volatility of Covid restrictions was affecting its sales growth.
The fashion retailer cautioned that sales in the past three weeks had been more muted because young shoppers’ hopes of being able to go on holiday, attend festivals or socialise in larger groups had been dashed by the delay to “Freedom Day”.
Shares in Asos fell sharply and closed down by 853p, or 18.1 per cent, at £38.54 as investors digested the warning about a slowdown in sales.
Nick Beighton, 54, chief executive, said that the sudden changes to travel restrictions and self-isolation periods meant it was “impossible” for people to plan their lives and their fashion choices. “Many young people spend as much on their holiday wardrobe as they do on the holiday itself,” he added.
Asos had been crowned a pandemic winner after its sales and profits soared on the back of the switch to online shopping during lockdowns. Beighton denied the retailer was losing market share to reopened bricks and mortar stores and said the whole clothing market was “soft”, but the City has been spooked by the faltering momentum at Asos.
The warning comes as Uniqlo’s owner Fast Retailing lowered its annual profit guidance after warning that footfall at its stores would decline because of rising Covid-19 infections.
Asos still reported a 27 per cent rise in group revenues to £1.29 billion in the four months to the end of June. It also revealed significantly lower underlying growth, at 17 per cent, as customers returned fewer products than expected, meaning it had kept more sales last year than it had reported in 2020
The retailer, which has grown rapidly to make the majority of its revenues overseas, said that despite the uncertainty it expected full year adjusted pre-tax profit to be in line with expectations once interest costs associated with its recent £500 million bond and other costs associated with its £295 million Topshop takeover were stripped out.
Analysts at Berenberg said that the Asos share sell-off had been “overdone” and highlighted that the two key headwinds of inclement weather and Covid uncertainty looked likely to be reduced in the coming weeks in the UK.