Asos share price drops 14% amid Covid fears

Online fashion giant Asos saw UK sales rise by 60 per cent in the four months to the end of June, but has warned that further volatility looms as the pandemic rolls on.

With many bricks-and-mortar stores only just starting to reopening over the period, Asos was able to capitalise on the shutdown and added 1.2million customers to its site. Customers that have been inspired by the recent lockdown easing, with more dresses and ‘occasion wear’ lines sold on Asos’ website. 

But, poor weather and ‘volatility’, in part driven by ongoing uncertainty over Covid 19, meant sales had become more ‘muted’ in the past few weeks, Asos said.

With the company voicing caution for the coming year, shares in Aim-listed Asos have fallen sharply and are currently down 14.32 per cent or 674.00p to 4,033.00p this morning. A year ago the group’s share price was 3,489.00p. 

The retailer also highlighted that profits were being squeezed in part due to increased freight costs and global supply chain disruption. 

Boss Nick Beighton, said: ‘ASOS has delivered another strong performance against a backdrop of continued social restrictions and global supply chain pressures.’

The group expects its full-year profit to come broadly in line with expectations. 

Asos said sales had been strong across its operations in the European Union, particularly in Germany.

Growth in the EU has also increased, particularly in Germany.

Earlier this week, Asos announced it had struck a deal with US department brand Nordstrom to sell Topshop lines in their US stores. The company hopes to expand its global reach further in future. 

The company said in an update to the stock market: ‘Trading in the last three weeks of the period was more muted, as continued Covid uncertainty and inclement weather, particularly in the UK, impacted market demand.

‘We anticipate a measure of volatility to continue in the near term, given the rapidly evolving Covid situation worldwide.’

It added that there was a ‘strong performance in the UK, with increased promotional activity to capture the available demand for our compelling product offer, despite the reopening of physical stores early in the period.

‘The final weeks of June saw a softening, due to the impact on consumer demand of continuing Covid uncertainty and unseasonal weather.’

Sales in the four months to 30 June jumped 31 per cent to £1.29billion, including a 60 per cent rise in UK sales to £526.4million.

The US saw growth of 31 per cent to £144.8million, although this was bolstered by currency fluctuations in Asos’s favour. 

Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said: ‘Bad weather and ongoing uncertainty mean Asos’ UK sales trends weakened towards the end of June. 

‘This is to be expected – if there’s any doubt about when so-called freedom-day is going to happen, its young, core customers will hold off on buying party dresses. Heavy rain means less socialising too. With restrictions set to ease in the coming days, we could see increased demand as people gear up to hit bars and clubs once more.

There is a lot resting on sales regaining some of the lost ground, with the market clearly disappointed in the uncertainty pointed out in Asos’ trading statement. Next quarter will be crucial because it will give a better indication of the sales pace Asos can achieve in more normal times.’

Richard Hunter, head of markets at Interactive Investor, said: ‘The challenges which are likely to come have taken some of the froth from the share price of late, as evidenced by a 13% dip over the last three months. 

‘However, over the last year the shares remain ahead by 40%, in line with the hike seen in the wider FTSE AIM 100, and the market consensus has not diminished on longer term prospects, still coming in at a strong buy.’