Online fashion retailer boohoo has issued a statement seeking to reassure the market that it has been trading well, despite the shock profits warning from online fashion giant ASOS. The unexpected news from ASOS led to a dramatic slump in its share price during early trading wiping almost £1bn off its market capitalisation.
In a bid to protect its own share price Manchester-based boohoo, which also owns the PrettyLittleThing and Nasty Gal brands, rushed out a brief statement to say it had experienced “record” sales during the Black Friday period, which had been a major disappointment for many retailers.
“[We] pleased to confirm that the group’s trading performance remains strong, with record Black Friday sales across the group and [we] continue to trade comfortably in line with market expectations. The group will provide an update for the four month trading period to December 31st on January 15th 2019,” it said.
ASOS warned this morning that it had experienced “a significant deterioration in the important trading month of November and conditions remain challenging”. It said it had witnessed an unprecedented level of discounting with which it had to compete.
As a result the etailer said it expected sales growth of 15% for the year to August 2019, down from 20% to 25%, and its anticipated earnings margin has been revised down from 4% to 2%.
The news sent its shares into freefall. At the time of writing shares were down more than 40% to 2,388p. Its shares have been steadily eroded over the past 12 months as the retail sector in general fell out of favour with investors. It began the year with a sharp price of around 6,864p. Retail expert Paul Mitchell has pointed out on Twitter that ASOS’s market capitalisation is now £3bn lower than it was a year ago.
Just over a year ago on 15th November 2017 @ASOS market cap was £5.06bn. This morning it currently stands at £2.03bn.
— Paul Mitchell (@PaulTMRetail) December 17, 2018
Despite the reassurance, boohoo shares have also taken a hit, and were down 10% during early trading to 164.25p. However many retail shares, including Next and Marks & Spencer, have taken a hit this morning as the new caused shockwaves in the market.
While ASOS did not mention Brexit in its statement, the uncertainty around the UK’s future relationship with the EU and the delay of the long-awaited Parliamentary vote on the matter has dented consumer confidence. The weather too, in the form of an unseasonably warm autumn, has also had a detrimental affect on sales.