Asos Shares Slump 40% After Profit Warning
Shares in Asos fell 40% in early trading on Thursday after the online fashion retailer issued a profit warning.
The company, a darling for investors since its flotation in 2001, saw its value double in the 12 months preceding an announcement last March that it planned to invest heavily in its infrastructure to help meet future demand - a revelation that sparked a sell-off.
In Thursday's unexpected trading update, Asos said it would be less profitable this year due to higher promotional activity, the strong rate of growth in low-margin British products and the hit from the strong pound.
Chief executive Nick Robinson said: "Whilst our profit performance for this financial year is not what we had hoped for due to an unusual combination of factors, our accelerated investment in technology and infrastructure to support our £2.5bn sales ambition is progressing and capex (capital expenditure) remains within guided levels."
The firm forecast its operating margin for the current financial year to come in at around 4.5% from around 6.5% due to strong sales in Britain, where its margins are generally lower because of strong competition.
Retail sales in Britain in the three months to the end of May were up 43% while international sales, which tend to sell at a higher margin, were up 17% but hit by the strong pound.
The resulting stock sell-off eased as morning trading continued, with shares trading 30% lower, although it still meant more than £1bn had been wiped from the company's value.