ASOS shares (LON:ASC) sank on Monday after the online retailer said it expected profits to decline and their CEO, Nick Beighton, was stepping down with immediate effect.
ASOS shares were down over 10% in early trade before rebounding.
Following a strong year aided by lockdowns and lower returns rates, ASOS said the next year would be fraught with supply chain issues leading to the group revising down their pre-tax profit to £110m-£140m, well below consensus of £193m.
“ASOS has enjoyed a huge boost to trading over lockdowns, albeit for less-lucrative casual wear as its core demographic was stuck at home. A reluctance to leave the house meant return rates were lower, resulting in XL margins. However, the tailwinds are easing and the ASOS bubble has burst,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
ASOS follows Boohoo in the release of a sobering update that pointed to a less than sparkling fast fashion industry.
“The market had a sense that life has been a bit of struggle for ASOS, given the gloomy update from rival Boohoo in recent days which seemed to confirm that the fast fashion industry was not enjoying the best of times,” says Russ Mould, investment director at AJ Bell.
“The scale of the problems at ASOS appear to have been underestimated but the company parting ways with its chief executive is less of a surprise. Nick Beighton has been struggling to steer the ship through problems that go back quite a few years.”
“The near-term outlook is somewhat bleak for ASOS. Sales growth is expected to slow quite dramatically; cost pressures and supply chain problems could remain intact for a while, which means profit margins will be squeezed; and consumer uncertainty could result in volatile trading patterns.”
“ASOS is guiding for pre-tax profit in the year of £110 million to £140 million, which is 35% below the market consensus forecast of £193 million if you take the mid-point of the profit range.”