After issuing a profit warning, British online retailer Asos has lost nearly half of its stock value. November proved to be a particularly bad month: not just for Asos, but for the entire fashion industry.
Brexit, 'gilets jaunes' and cheap youngsters
Asos, a darling for international investors, lost nearly a billion euros in market value on the British stock exchange - in just half a day. Its share values plummeted by more than 40 % as a result of the profit warning issued by the British fashion platform. The retailer expects 'only' a 15 % turnover growth for the full financial year (ending in August 2019). Earlier on, the prediction was 20 to 25 % growth.
The lowered expectations come after what Asos top executive Nick Beighton calls "a significant deterioration" in November: coats and gentlemen's sneakers - generally more expensive items - sold especially poorly and the CEO sees the consequences of an "unprecedented level of discounting" in the fashion industry. On Black Friday, Asos gave a 20 % discount on everything, but rivals went even further.
In addition, the Brits notice that shoppers are simply not buying as much as they used to. Consumer trust in the domestic market has been hit by the uncertainties surrounding Brexit, while the 'gilet jaunes' are keeping people away from stores in France. To add insult to injury, the autumn weather proved to be unusually soft this year.
Problems are structural as well: Asos' target group is people in their twenties and they are precisely the ones who are spending less money than a decade ago, says Beighton. "It’s more than just the Brexit-related factors," he believes. Beighton expects only a slight improvement in December, causing the company to spend 40 million pounds less this year, reining in the budget to 200 million pounds.
“Worst November ever"
If even the online giants are performing poorly, things are looking gloomy for everyone, according to analysts. All of the big fashion retailers have been seeing plummeting share values lately, from Zalando to H&M, despite the latter's strong growth. Eight out of the ten worst performing shares are retailers.
"If Asos is finding it tough out there, then just about every retail stock has a problem. We knew the high street was struggling due to structural shifts but Asos slashing guidance suggests things are even worse in the run-up to Christmas than previously thought for the sector and the strife extends well beyond the high street", market analyst Neil Wilson concludes in The Guardian in a statement that sums up the overall mood.
Sports Direct founder Mike Ashley has stated earlier that November turned out to be an unbelievably bad month for store chains, possibly the worst ever. In the past quarter, Asos itself grew by 14 %, but average sale prices plummeted by 6 %. While customers bought 3% more on average, their receipts were 3 % lower as well – a situation Beighton admits has not occurred in nine years.