Shares in Asos have tumbled by 14%, as the online fashion retailer and former stockmarket high flyer warned that profits growth will stall next year.
Asos also said that a fire in its main warehouse in June cost the business £25m–£30m in lost sales. It was forced to suspend trading for two days after the blaze ripped through its main warehouse, in Yorkshire.
Despite the fire, total sales grew by 15% to £240m over the summer, compared to the same period last year. In the UK, which accounts for 41% of the Asos business, sales rose 33%.
Nick Robertson, the chief executive, described UK performance as strong. After adjusting for the insurance payout for the fire, the company expects profit for this year to be in line with reduced expectations of £45m, down from earlier estimates of £69m following two profit warnings.
Now the group is warning that profits for its 2015 financial year are likely to be flat, as it steps up investment in logistics and its website. Analysts polled by Bloomberg had been expecting a recovery to £63m.
This latest profits alert was taken badly by market-watchers. "Asos has warned that profits in [year end] August 2015 will not recover … Ouch," the veteran retail analyst Nick Bubb wrote in a note, predicting that investors would have plenty to discuss with management.
However, he also said the UK sales growth was "very respectable at first sight" and not that far behind the "stellar" 50% sales growth seen at rival fashion retailer Boohoo.
The Asos share price dropped £20.88, down from £24.22 on market opening. Once the darling of investors, the online retailer has had a difficult year, where it has been forced to slash prices for non-UK customers because of the strong pound, leaving it more reliant on price-conscious domestic shoppers in an increasingly competitive UK market. Asos shares have shed 60% of their value this year, after more than doubling in 2014.
After the fire, the company launched a massive summer sale in an attempt to win back customers. The fire and sprinkler system ruined about 20% of the stock held at the Barnsley warehouse but the disruption was even greater because every product Asos sold was checked at that site.
The fire appears not to have dented customer loyalty, however, with the company reporting that shoppers were ordering Asos clothes more frequently.
In the immediate aftermath, some customers were sympathetic to the retailer, although a few grumbled because their new togs would not arrive in time for Glastonbury.
