Tuesday, March 28

Asos Warns of Weakening Sales as Consumers Cut Spending

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

Full-year profit will come in at the lower end of guidance, with sales growth of only about 2%, according to a statement Friday. The online retailer also cited a slow start to its autumn/winter ranges. The stock fell as much as 4.2% in early trading in London.

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

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

Asos is having a difficult year and issued a surprise 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 ($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 CEO.

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Shoppers are navigating the highest inflation in four decades in the UK and there are signs that they’re cutting back on purchases of clothing and other non-essential items. Retail sales growth slowed to just 1% 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 favorite, 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 Inc. took a minority stake in the brands through a joint venture.

The stock has fallen more than 70% this year. Some hedge funds are betting that it has further to fall. Marshall Wace, Qube Research & Technologies Ltd. and others have built short positions totaling about 6% of Asos shares, up from around 3 % earlier this year.

(Updates with AB Foods in fourth paragraph and shares in second.)