Online fashion retailer ASOS has issued its second profits warning in three months after the strength of the pound hits overseas sales and forced it into a rash of promotions.
Shares slumped by as much as 40 per cent – wiping £1.5bn from its market value – as it said growth in international revenues in the third quarter to the end of May was just 17 per cent, compared with 48 per cent in the same period last year.
The weakness prompted the retailer, which achieves a high proportion of revenues from womenswear, to ramp up promotions. These normally represent three per cent of sales but this rose to eight per cent. The offers were not enough to offset the decline in performance overseas - a market representing 60 per cent of sales – where customers are finding ASOS products more expensive because of the strengthening pound, which has risen 10 per cent over the last year.
Chief executive Nick Robertson admitted that its profit performance for the financial year was “not what we had hoped for” as the group slashed its expected underlying earnings margin from 6.5 per cent to 4.5 per cent.
With the company targeting £1bn sales for the financial year, it implied a fall in profits from £65m to £45m. It comes after the firm warned in March that the costs of new warehousing in the UK and Germany as well as start-up expenses in China would hit earnings.