Finally, after a very rocky day, ASOS shares have closed at £26.14, a slump of 37.5%.

That wipes £1.3bn off its value, sending it slumping from £3.5bn to £2.2bn.

Here’s a reminder of why:

Asos has issued an unexpected profit warning after a poor November, becoming the latest retailer to be hit by weak consumer confidence, increased discounting and unusually mild weather.

The downturn suggests the high street malaise is spreading to online retailers, with consumers worried about what Brexit will mean for their finances.

Here’s the full story:

Goodnight. GW

David Madden, market analyst at CMC Markets UK, says Asos’s profits warning at 7am today has hurt the retail sector badly today:

The UK retail sector took a knock today after well-known ASOS shares were battered on the back of an earnings warning.

ASOS shares have slumped after the online fashion house announced a profit warning. The group said that sales from September to November jumped by 14%, but there was a ‘significant deterioration’ in November. The company previously predicted full-year sales growth of 20-25%, and now it anticipates just 15%. Profit margins have been revised down to 2% from 4%. Nick Beighton, the CEO, warned that the sector is experiencing ‘unprecedented levels of discounting’.

Online companies have a major cost advantage over high street retailers, and it is worrying when they are concerned about consumer spending.

UK retailers aren’t the only people feeling gloomy -- America’s builders are also feeling a chill.

Back in the City, UK retailers are being hit even harder.

Next are down 6.5%, Marks & Spencer have lost 5%, Dunelm (home furnishings) has slumped by 10%, and Games Workshop (small metal figurines) are down 5.7%.

JD Sports has tumbled by 8.4%, despite putting out a statement confirming that its Christmas trading statement is scheduled for 14 January 2019 (ie: they’re not expecting a profits warning...)

This is dragging London stock market deeper into the read, with the FTSE 100 down 1.1% and the FTSE 250 shedding 1.4%.

It’s not just Asos’s fault, though. Investors are also being spooked by a bad start to trading on Wall Street.

Steve Dresser is continuing to spot examples of retailers taking, er, liberties with their Christmas gift pricing...

Asos’s shares are still being thumped today; still down 40% at £25,47, a loss of over £16 today.

That has wiped almost £1.4bn off its market value today, down from £3.5bn to £2.1bn.

It has also helped pull the AIM index (where Asos is listed) down to its lowest level in almost two years.

Spice Girl turned fashion designer/businesswoman Victoria Beckham is also suffering from the tough retail environment.

Losses at Beckham’s luxury fashion label rose to £10.2m last year, new figures show, up from £8.2m in the previous 12 months.

Retail analyst Steve Dresser has spotted that UK retailer Fat Face is now offering cash off sales in the 2019, if shoppers will only buy something today....

With discounting rampant this year, some stores are being forced to cut prices to more realistic levels...

George Salmon, equity analyst at Hargreaves Lansdown, reckons Asos is particularly vulnerable to Brexit gloom because it targets younger shoppers:

“The uncertainty around Brexit will be playing a major role, and it’s probably no coincidence Asos’s key demographic of 20-somethings generally harbour more concerns over the future of the economy post-Brexit than their parents.”

Julie Palmer, partner at consultancy Begbies Traynor, points out that many smaller online shops have hit trouble this autumn.

Asos is not alone, although this morning’s shock profits warning has obviously caused alarm...

Palmer explains:

“Seeing this goliath of the online retail world start to wobble shows that it’s not just the physical high street that needs to take a look at its model and resilience.

“In fact, our own Red Flag Alert revealed that there has been a creeping undercurrent of online retailers suffering in the challenging climate this year with more than 8,000 online retailers in significant financial distress during Q3 – an increase of 8% since the same time in 2017.

“A retailer issuing a profit warning this close to Christmas is never a good thing, but seeing one as big as ASOS issuing a profit is quite a clubbing for an industry that has already taken a battering.”

Retailers across Europe are reeling from Asos’s profits warning:

Brexit uncertainty has left many people too frightened to spend, says Hannah Maundrell, Editor in Chief of money.co.uk.

That’s a blow to high street shops, web retailers such as ASOS, and other customer-facing firms, she explains:

“Don’t waste time stressing about what Brexit might mean for your finances, focus instead on getting on top of them so you’re in the best possible place to enjoy whatever happens down the road.

It’s as simple as keeping track of what cash you’ve got coming in and going out, looking for easy ways to pay big companies less – like switching your mortgage - paying off expensive borrowing and squirrelling away any spare cash you can afford so you have an emergency fund to fall back on just in case times get tight.”

Ouch:

If Asos is struggling, then many other retailers will be doing even worse, reckons Andrea Felsted of Bloomberg.

She argues:

To some extent, it’s a surprise that the first seasonal shocker has come from Asos. It specializes in fast fashion. The conventional wisdom goes that internet retailers should be in a better position that beleaguered bricks and mortar stores when a squeeze on shopping comes.

But the clothing sector has been hit by the double whammy of warm weather and rocky consumer confidence. While Brexit looks like it might become the next convenient excuse for poor trading, senior retailers say the downturn since October has been real. It’s as if someone switched the lights off.

Asos’s problems show that the UK retail sector is in a serious fix, says Russ Mould, investment director at stockbrokers AJ Bell.

He writes:

It is not just that we’ve stopped shopping on the high street, it is that we’re spending less overall.

“Everyone knew bricks and mortar retail was in trouble; after all, why struggle out to the shops and battle the crowds when everything you want is available at the click of a button from the comfort of your own home?

“The read-through from ASOS’s results is that consumers are feeling sufficiently nervous to put off purchases no matter how they make them. This will strike fear into other internet-based retailers and more traditional rivals who were banking on their web-based portals to get them out of trouble.

“The alternative, which seems unlikely but can’t be ruled out entirely, is that this is more of an ASOS-specific issue. Fashion is fickle and perhaps ASOS was not quite as on top of what its shoppers want as it has been historically. Interestingly, BooHoo has put out a statement which says its own trading remains strong (see here).

“With just a week left of crucial Christmas trading we should have our answer to whether this is a micro or macro issue as January trading updates trickle in from across the sector.”

Kate Heseltine, analyst at Edison Investment Research, says:

“The significance of the warning by ASOS, one of the leading online retailers, could hardly be higher for the consumer sector. Coming at the end of its first quarter, it entails a substantial judgment call for the rest of the year to August 2019 – a call that management has made negatively.

It seems that Mike Ashley is not the only retailer to have experienced an ‘unbelievably bad’ November with online giant, ASOS, issuing a major profit warning in its Q1 trading update this morning.

In another blow to the UK economy, people’s confidence in their finances has slumped to a six-month low -- one of the reasons behind Asos’s problems?

Data firm IHS Markit says its Household Finance Index has dropped to 43.9 in December, its lowest since June, from 44.4 in November.

Markit warned that households are particularly worried about financial prospects in 2019, as they face rising costs and the uncertainty over Brexit.

Economist Joe Hayes says:

“(The) data demonstrate the negative impact that political and economic uncertainty is having on households.

If sentiment continues to decline, the effect on the real economy may become more apparent in hard data if households begin to alter consumption behaviour.”

The survey also found that Londoners are particularly gloomy about house prices.

Asos’s profit warning is a clear sign that this Christmas will be tough for many retailers, warns business journalist Declan Curry:

Asos’s shares are plumbing new depths.

They’re now down 42% at £24.24, from £41.86 on Friday night.

Other retailers are also being hammered, with Next and Marks & Spencer plunging to the bottom of the FTSE 100 index this morning:

It’s a similar picture on the FTSE 250 index (which includes smaller companies than the FTSE 100). JD Sports, Sports Direct and Dixons Carphone are all among the top fallers

Several commentators are blaming Brexit for at least some of Asos’s woes.

Matthew Vincent of the Financial Times says:

Asos did not mention Brexit, but when it notes that “consumer confidence is increasingly fragile” it can only be talking about one factor. Why else would it have to resort to so much discounting and promotional activity that it expects to halve its operating margin?

Today’s warning comes after consultancy Springboard said that the number of people visiting British shops in November was the worst since the 2008 recession, with so-called footfall at retail parks and high streets down 3.2 per cent on the year before. But, clearly, it is not just bricks and mortar shops any more.

Anyone trying to blame the web alone for the “hollowing out” of Britain’s high streets needs to look further afield than the “web boys”... the Westminster boys would be a place to start.

Asset manager Trevor Greetham also blames the deadlock over the UK’s exit from the EU:

Overnight, retail analysts at Springboard predicted that consumer spending is unlikely to pick up this week.

Diane Wehrle, insights director at Springboard, predicted that sales will be 3% lower than last year, warning:

“We are not anticipating it will be a bumper week by any means,”

“Consumers are feeling nervous about what might happen in the new year, particularly around Brexit. So people are not prepared to splash out this Christmas and are reining back on spending.

More here:

Retail analyst Nick Bubb says analysts are “shell-shocked” by Asos’s profits warning this morning:

“The share price of Asos has been under some pressure recently, as if the City sensed that something might be amiss, but we certainly weren’t expecting the online fashion giant to issue a huge profit warning today,”

Asos’s market capitalisation (the value of the company) has slumped from £3.5bn to £2.2bn

Shares in high street chain Next have slumped by 5%, as Asos’s pessimism chills the retail sector

Asos’s problems aren’t confined to the UK. It explains:

Trading conditions across our two largest markets of Germany and France, which account for c.60% of EU sales, have become significantly more challenging.

Financial analyst and journalist Louise Cooper points out that Germany’s economy shrank in the last quarter:

Asos isn’t pinning its hopes on a late surge in Christmas spending....

Men have been buying fewer sneakers, apparently....

Shares in Boohoo, a rival online fashion chain, are expected to fall by 5% this morning, as investors digest Asos’s profit warning.

You can see Asos’s profits warning online, here.

Here’s the top line:

Asos reckons it is still outperforming the wider UK retail sector, as weak consumer confidence hits shops hard.

It says:

In the UK, ASOS continues to materially outperform in its home market with sales growth in the year-to-date (1 September through 30 November) of +19% (cc: 19%), although this has been achieved at the cost of more promotional activity than initially planned and consumers buying into lower priced product.

Consumer confidence is increasingly fragile as evidenced by the most recent BRC data.

City traders are predicting that Asos’s shares will tumble by 15% to 20% when trading begins, in under half an hour.

Asos has been one of the leading lights in the UK retail sector for years, so today’s profits warning is a serious issue.

Here’s some early reaction:

Asos’s CEO Nick Beighton says:

“We achieved 14% sales growth in a difficult market, but in the light of a significant downturn in November, we think it’s prudent to recalibrate our expectations for the full year.

We are taking all appropriate actions and our ambitions for ASOS have not changed”.

ASOS has slashed its forecasts for sales growth and earnings, following weak trading in November.

Gross profit margins will be narrower than last year, as the company is forced to discount its clothing. The company is also trimming its capital spending plans, as it hunkers down.

Here’s the company’s revised guidance:

• Sales growth: c.15% (previously +20-25%)
  
• Retail gross margin: c.-150bps (previously flat at 49.9%)
  
• EBIT margin: c.2% (previously c.4%)
  
• Capital expenditure re-phased down to c.£200m