(Bloomberg) — Two of Britain’s biggest online fashion retailers reported slowing sales in a fresh sign that the cost-of-living crisis in the UK is denting consumer confidence.
Asos Plc slashed its profit and sales guidance while Boohoo Group Plc recorded the first UK sales decline in its history as shoppers bought less online and returned more goods.
Shares in Asos slumped more than 16% and Boohoo stock fell about 11% in early trading in London.
Previously considered lockdown winners, Asos and Boohoo have struggled as normal shopping trends return and supply chain woes persist.
Fast-fashion retailers are also being hit by intense competition from rivals such as discount upstart SheIn, at the same time as shoppers cut back on non-essential items with bills rising.
“We’ve started to see people looking at the money in their pocket and thinking that their fuel bills have gone up, they’re spending more on food and they’ve decided on balance to keep one less item,” said Mat Dunn, chief operating officer at Asos.
“We do think that behavior will normalize.”
Asos now expects sales to grow 4% to 7% for the full year, down from previous guidance in January of 10% to 15%, according to a trading update on Thursday.
The company expects adjusted pretax profit of £20 million ($24 million) to £60 million, compared with prior guidance of £110 million to £140 million.
Asos said that net sales have been impacted by a significant rise in consumers returning garments in the UK and Europe, a sign of shoppers getting pickier under the pressure of rising inflation.
In April, Asos warned that its full-year earnings goal was at risk from accelerating inflation and disruption from Russia’s war in Ukraine.
The company separately named Jose Antonio Ramos Calamonte as chief executive officer.
He is currently chief commercial officer of Asos.
Returns headache
Higher returns also hit Boohoo’s performance with sales falling 1% in its British home market and dropping 8% overall in the first quarter, according to a trading update.
Boohoo blamed the fall on tough comparisons with last year when people were spending more online during lockdowns and returning fewer items.
The retailer said that UK sales did start to improve month-on-month during the period and stuck to its previously lowered guidance for the full year of low single digit revenue growth.
This would be the smallest increase since its initial stock sale in 2014. Boohoo’s profitability is also expected to be much lower than its historical average.
Boohoo, whose other brands include PrettyLittleThing and Nasty Gal, warned last month that sales growth may grind to a halt in the first half.
It already cut its sales projections twice last year and is recovering from a labor supply scandal in 2020 which sparked governance changes.
“While the top-line deceleration was expected, it has been more pronounced than we have assumed,” said Andrew Wade, an analyst at Jefferies, adding that Boohoo’s guidance for first-half revenue to be “broadly flat now looks stretching.”
Boohoo could struggle to push up prices as many of its customers battle rising bills, according to Wayne Brown, an analyst at Liberum.
In a tough day for British retailers, shares in Halfords Group Plc plunged to their biggest intraday drop since March 2020 after the automotive and bicycle retailer warned of rising inflation and declining consumer confidence.
(Updates with quotes from company executives and analysts throughout)
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
