Asos share price drops 14% amid Covid fears

Asos share price drops 14% as online apparel giant voices caution over Covid, supply chain issues and recent ‘muffled’ sales

  • Asos saw UK sales rise 60% in the four months to the end of June
  • But sales in recent weeks have been more ‘muted’ amid inclement weather
  • Boss says group is cautious amid volatility, Covid and supply chain issues
  • Shares in Aim-listed online retailer are down more than 14% today

Online fashion giant Asos saw UK sales rise 60 percent in the four months to the end of June, but has warned that further volatility is looming as the pandemic continues.

With many brick and mortar stores only just starting to reopen during the period, Asos was able to take advantage of the closure and add 1.2 million customers to its site. Customers inspired by the recent easing of lockdown, with more dresses and ‘occasion wear’ lines being sold on Asos’ website.

But bad weather and “volatility,” driven in part by lingering uncertainty over Covid 19, meant sales had become more “muffled” in recent weeks, Asos said.

With the company now cautious for the year ahead, shares in Aim-listed Asos have fallen sharply and are currently down 14.32 percent or 674.00p to 4,033.00p this morning. A year ago, the group’s share price was 3,489.00 pence.

Note: Shares in Asos fell more than 14% this morning after the group gave an update

The retailer also stressed that profits were under pressure, partly due to higher freight costs and disruption to the global supply chain.

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

The group expects full year earnings to be broadly in line with expectations.

Asos said sales were strong across all of its operations in the European Union, especially in Germany.

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

Revenue Growth: Asos saw UK sales rise 60% in recent months

Revenue Growth: Asos saw UK sales rise 60% in recent months

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

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

“We expect some degree of volatility to continue in the near term given the rapidly evolving Covid situation worldwide.”

It added that there was “strong performance in the UK, with increased promotional activity to capture the available demand for our attractive product offerings, despite the reopening of physical stores early in the period.”

“There was a softening in the last weeks of June due to the impact on consumer demand from continued Covid uncertainty and unusual weather.”

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

The US saw 31 percent growth to £144.8 million, although this was bolstered by currency movements in Asos’s favour.

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

This is to be expected – if there is any doubt about when the so-called freedom day will take place, the young core customers will wait to buy party dresses. Heavy rain also means less fun. With restrictions set to ease in the coming days, we may see increased demand as people gear up to hit bars and clubs again.

Much is resting on sales regaining some of the lost ground, with the market clearly disappointed in the uncertainty noted in Asos’s trading statement. The next quarter will be crucial as 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 likely to come have taken some of the foam off the stock price lately, as evidenced by a 13% decline in the past three months.

“However, over the past year stocks have remained 40% higher, in line with the gains we saw in the broader FTSE AIM 100, and market consensus has not diminished on the longer-term outlook, and continues to come in with a strong buy. ‘