Retail stocks in the UK and Europe tumbled after ASOS warned this morning that full-year profits would be lower, blaming a “significant deterioration” in November trading.
The online fashion giant’s shares plunged 42% to £24.47 after closing at £41.86 on Friday, sending the share price of peers lower.
ASOS’s market cap stands at £2.08bn, having reached £5.06bn last November when it overtook Marks & Spencer for the first time, in what was dubbed “retail’s Tesla moment” and was deemed a turning point for retail as the power shifted to the new guard of digital retailers.
Rival Boohoo Group’s shares fell 11% to £16.35 despite issuing a statement to reassure investors that it continued to “comfortably trade in line with market expectations” helped by record sales from Black Friday.
FTSE 100 high street bellwethers Marks & Spencer and Next shares were also down 4.3% and 2.8%, respectively.
Quiz shares fell 14%, JD Sports was down 4.9%, Sports Direct was down 3.9%, Debenhams was down 6.9%, Dixons Carphone dropped 3.9%, and Associated British Foods, the owner of discount retailer Primark, was down 3.1%.
The reverberations were also being felt across Europe with brands such as Adidas, Hugo Boss, Zalando, Inditex and H&M all seeing drops in their share price this morning. This is perhaps indicative of the fact that ASOS said tough trading had not been confined to the UK but had also been experienced in France and Germany too.
ASOS’s profit warning suggests it is not just high street retailers being affected by low consumer confidence and weather-related problems.
Neil Wilson, chief market analyst at Markets.com notes softer consumer confidence and weather affecting retailers.
He said: “Every retailer that ever existed blames the weather, but to a degree we must accept it has been a factor this year.
“Online businesses have seemed immune but the warning from ASOS today suggests they too are at risk from the cyclical slowdown. We must stress that the ASOS warning is indicative of a cyclical slowdown rather than being suggestive of the structural problems facing the high street.”
Julie Palmer, partner at consultancy Begbies Traynor said ASOS was not the online online retailer to be feeling the ill-effects of a downturn in consumer spending and confidence. “Seeing this goliath of the online retail world start to wobble shows that it’s not just the physical high street that needs to take a look at its model and resilience.
“In fact, our own Red Flag Alert revealed that there has been a creeping undercurrent of online retailers suffering in the challenging climate this year with more than 8,000 online retailers in significant financial distress during Q3 – an increase of 8% since the same time in 2017.
“A retailer issuing a profit warning this close to Christmas is never a good thing, but seeing one as big as ASOS issuing a profit is quite a clubbing for an industry that has already taken a battering.”
Words: Press Association with additional reporting from The Industry