Asos issues profit warning

Online fashion retailer Asos has issued an unexpected profit warning thanks to a sector wide pattern of heavy discounting during the Cyber Weekend period bringing about poor results. Next, Debenhams and M&S have also been affected.

While the high street retailers being affected can largely be considered something to do with online retailers like Asos competing with lower margins, Asos being hit suggests a wider spread problem in fashion retailing. This has been put down to Brexit induced poor consumer confidence as well as heavy discounting across the sector around Cyber Weekend.

When Asos reported its issues, its share price fell by 37.5%. Its rival online retailer Boohoo saw a fall in share value too, but reported that it didn’t have the same issues over November.

Asos chief executive, Nick Beighton, said: “In fashion we are seeing an unprecedented level of discounting, certainly something I have not seen before, and that’s across the board.”

He said he had been “astonished at the level of promotions and discounting, especially around Black Friday”, predicting heavy discounting would continue in coming months.

The online fashion retailer cut its prices by 20% on Black Friday as it did in previous November sales events. High Street rivals offered even bigger cuts. Beighton denied however that Asos had lost market share in the UK, saying that consumer spending as a whole was down here. Asos was however affected by poor trading in France and Germany, which account for 60% of its EU sales.

Could we see other big players in the online fashion segment – online or offline – go under in the next 12 months? Signs are that this is very possible.


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