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Asos shares slide despite US Topshop optimism

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ASOS
ASOS

Shares in Asos plunged by almost a fifth as it warned that unseasonal weather and uncertainty surrounding pandemic restrictions caused a slowdown in sales.

The online fashion retailer, which is aimed at shoppers in their late teens and twenties, said the cooler summer weather and changing rules on travel restrictions were making it tougher for customers to know what to buy.

Asos said sales jumped by more than a quarter in the four months to June 30 to almost £1.3bn compared with a year earlier, but added that trading had slowed during the final weeks of June.

Nick Beighton, chief executive of Asos, said: "There's a mountain of volatility which makes it really impossible for people to plan things, and therefore their fashion choices accordingly.

"Twentysomethings' lives are being disrupted by shifting sands."

The company's shares fell as much as 18pc to £38.74 following the announcement - their lowest level since in almost a year.

Asos has benefitted from a shift to online shopping during the pandemic as a string of lockdowns forced non-essential retailers to shut for prolonged periods. Mr Beighton said the company was "mindful" of the impact of Covid uncertainty in the short-term but insisted that the pandemic would "drive an increase in online fashion sales" over the long term.

The retailer said it has also faced higher freight costs in recent weeks with post-Brexit red tape making it tougher to move products between warehouses.

Asos's cautious tone comes as it pursues a further expansion in the US through the Topshop and Topman brands which it bought alongside Miss Selfridge earlier this year following the collapse of Sir Philip Green's Arcadia empire.

Asos has raised £500m of debt to fund its plans and this week struck a deal with Nordstrom to get Topshop back into US stores.

Topshop announced the closure of all its American outlets just over two years ago marking an embarrassing retreat for Sir Philip after the chain opened its first store in 2009 in a lavish ceremony hosted by Kate Moss.

However, Mr Beighton said Arcadia's "distressed" business model was to blame for its failure to gain a foothold in America and insisted the Topshop brand was strong enough to resonate with US consumers.

He said: "Arcadia was a distressed business model that had not had the necessary investment or pivot to digitalisation that we would expect. Let's separate out the challenges of the business model that Arcadia was running versus the iconic nature of Topshop and Topman."

"Sales are up triple digits since we relaunched the brands in March, so they're selling extremely well, and that's in North America, the UK and Germany."

John Stevenson, a retail analyst at Peel Hunt, said Asos's business model meant it was "well-placed" to return Topshop to the US.

He said: "When UK businesses have historically gone to the US, they've gone as a mono-brand with a form of retailing which is very European - and funnily enough that hasn't worked as well.

"They're agnostic about what they sell, so they just have to make sure they have the right brand mix. They've got every chance of making it work. Having Topshop is great because it will bring traffic to the website, so it's very different from someone like M&S coming to the states."

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