Business

Asos warns of weakening sales with cautious outlook on consumers

Retailer’s shares fell by 4.2% in early trading in London and later erased their decline

'Asos remains cautious about the outlook for consumer spending,' the company said. Photograph: Suzanne Plunkett

Fri Sep 9 2022 - 08:10

British fast-fashion company Asos warned that sales in August were weaker than expected as inflation crimped shoppers’ purchasing power.

“Asos remains cautious about the outlook for consumer spending,” the company said.

The earnings season looks likely to continue to be tough for retailers. Associated British Foods, owner of Penneys and Primark, warned on Thursday that profit will decline next year under pressure from rising energy costs and the strengthening of the dollar.

Asos shares fell as much as 4.2 per cent in early trading in London and later erased their decline. Andrew Wade, an analyst at Jefferies, said the warning isn’t coming as a big surprise to the market.

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Asos is having a difficult year and issued a profit warning in June as the cost-of-living crisis sapped consumers’ spending power. The company had already warned in April that its earnings goal was at risk from inflation and disruption from the war in Ukraine. The lower end of its guidance is 20 million pounds (€23 million).

The company’s top management team is also changing again with Mat Dunn, who oversaw the business after Nick Beighton left last year, leaving and handing over to chief commercial officer Jose Antonio Ramos Calamonte as chief executive.

Shoppers are navigating the highest inflation in four decades in the UK and there are signs that they are cutting back on purchases of clothing and other non-essential items. Retail sales growth slowed to just 1 per cent last month and fashion sales were sluggish, British Retail Consortium and consultancy KPMG said in a report.

For many years Asos was a stock-market favourite, reporting increasing sales and profits. More recently the company has struggled with supply chain issues and the move away from online shopping back to stores after Covid restrictions were lifted.

Last year Asos acquired Topshop, Topman, Miss Selfridge and HIIT brands from Philip Green’s failed Arcadia. Since then US department store Nordstrom took a minority stake in the brands through a joint venture.

The stock has lost almost three-quarters of its value this year. Some hedge funds are betting that it has further to fall. Marshall Wace, Qube Research & Technologies and others have built short positions totalling about 6 per cent of Asos shares, up from about 3 per cent earlier this year. — Bloomberg LP

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