Linking: Model Elle Macpherson for the Boohoo brand Karen Millen
Hedge funds betting against Asos and Boohoo are profiting as shares of the beleaguered online retailers hit new lows.
The two e-commerce groups, which pioneered the fast fashion trend among younger customers, are currently the most “shorted” stocks on the stock market, so traders expect their value to fall further, as new figures show.
More than 7 per cent of Asos shares – and more than 6 per cent of Boohoo – are on loan. Boohoo owns brands such as Karen Millen.
It comes amid growing signs that sales at online-only businesses may have peaked as customers return to the high street. Online shopping skyrocketed during the pandemic as lockdowns shuttered non-essential stores and working from home sent demand for new clothing, especially dresses and suits, falling off a cliff.
But the end of Covid restrictions has brought about a reversal of fortunes, with high street stalwarts like Next and Marks & Spencer enjoying a significant resurgence.
These companies have been most successful in balancing online sales through apps and websites with physical stores.
Last week it raised its full-year profit guidance, its fourth such upgrade in six months, while Asos said it was shelving a giant warehouse as sales fell and losses soared towards £300 millions.
Experts say clothing retailers are having to adapt to changing customer behavior.
“The way people shop has changed,” said Tamara Sender, director of fashion and retail at research group Mintel. ‘While there has been a return to visiting stores to buy clothing and footwear in the last year, a greater commitment to online use has persisted.
“People use smartphones to check stock availability and compare prices while browsing a physical store,” he added. “Consequently, more and more retailers are adopting a hybrid approach.”
Last month, online women’s clothing retailer Sosandar revealed plans to open physical stores for the first time. The Aim-listed company noted that around 60 per cent of sales in the £55bn clothing market are still made in stores, with the rest online.
“Our customers like to shop online and go to stores, so we have to do both,” said co-founder Ali Hall.
Investors remain unconvinced that its hybrid model will generate profitability.
Co-founder Julie Lavington said: ‘Our share price is the same as when we turned over £1m, except we’re now turning over £40m. It’s frustrating.’
Analysts say established retailers are well positioned to benefit as shopping habits change. Next’s latest update noted that online sales had risen 6.5 per cent in the three months to October compared to last year, while in-store sales fell 0.6 per cent due to unusually weather warm.
Experts say it’s too early to rule out fast fashion. They point to the success of Shein, the controversial e-commerce retailer that last week acquired fashion group Missguided from Mike Ashley’s Frasers Group.
Shein, which has been criticized for its treatment of workers in its Chinese factories, now enjoys UK sales of more than £1 billion. “She’s a phenomenon,” Lavington added.