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ASOS in SOS distress

Thursday, June 05, 2014 - 01:51

June 5 - ASOS shares have dived 30% after the British online fashion retailer warned full-year profits would miss forecasts by the same amount. Ivor Bennett looks at what's gone wrong at the former darling of the retail sector.

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Fast-changing fashion was its calling card. Now it's a fast-changing share price. Shares in British online fashion retailer ASOS plummeting by 30 percent on news of a profit warning. The group announced it will miss its operating margin by the same amount. The dive wiped 2 billion dollars off its market value. George Hay from Reuters Breakingviews. SOUNDBITE (English) GEORGE HAY, EUROPEAN EDITOR, REUTERS BREAKINGVIEWS, SAYING: "For a long time people have looked at their valuation and gone wow, this is stratospheric. The reason for that unsurprisingly is that people look at them and say they're a technology company, they're not just a kind of retail company like any of the other bog-standard high-street retailers. So there is a reason why it's been so high. But our line has tended to be, because it's priced to perfection, if anything at all goes wrong, you will see really big falls in the share price." ASOS blames the strength of sterling. The pound's five-and-a-half year high forcing the group to cut prices in foreign markets But international sales still slowed - with growth falling from 35 percent in the first half of the year, to 17 percent. SOUNDBITE (English) GEORGE HAY, EUROPEAN EDITOR, REUTERS BREAKINGVIEWS, SAYING: "Obviously you can get a certain way by saying 'well, it's all down to foreign currency movements'. But these are the kind of things, this is the water you swim in, you have to deal with these kinds of things." Floating at just 20 pence in 2001, ASOS soon became the darling of British retailing - growing rapidly as it met the demand for fast-changing trends. But the slide began in March - after a plan to spend on infrastructure in favour of short term profits spooked investors. The company's share price is now less than half its all-time high, a peak reached just 4 months ago.

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