Asos Plunges as Overseas Growth Stutters Amid Heavy Spending

(Bloomberg) -- Asos Plc shares tumbled after the U.K. online fashion retailer reported an unexpected slowdown in international sales while it increased spending on distribution.

Asos now expects full-year sales growth to be toward the lower end of its forecast range of 25 percent to 30 percent, the London-based company said in a statement Thursday. The shares fell as much as 12 percent, their biggest loss since April.

The lowered guidance will “weigh heavily on investor sentiment,” according to Bloomberg Intelligence analyst Chris Chaviaras. Sales growth in Europe slowed to 31 percent, missing the company-compiled consensus estimate for growth of 39 percent.

Asos has been investing heavily in warehouses in Berlin and Atlanta in a bid to sustain sales growth as Amazon.com Inc. steps up its efforts in fashion. The company expects to make capital expenditures of as much as 250 million pounds ($330 million) this year. While web retailers are benefiting from increased online shopping, all clothing sellers are battling a shift in spending to entertainment.

The company’s warehouse in Berlin will have doubled its capacity to 20 million products by September and Asos will open a 1 million-square-foot facility in Atlanta in a couple of weeks.

The work to upgrade the Berlin facility limited sales on the continent this quarter, Chief Executive Officer Nick Beighton said on a call with reporters. Asos will use the additional capacity to handle more orders from outside of the U.K. if Brexit disrupts trade, he said.

C&J Clark Ltd., the seller of Clarks shoes, and The Hut Group Ltd. are also said to be planning on using European facilities to fulfill orders should Brexit lead to tariffs and further barriers.

More Retail Woes

The U.K.’s physical retailers are also continuing to struggle. E-commerce now accounts for 18 percent of U.K. retail sales -- almost double the level in the U.S. -- and this year has already seen the collapse of Toys “R” Us U.K. and electronics retailer Maplin.

DFS Furniture Plc said Thursday it expects earnings before interest, taxes, depreciation and amortization to fall this year after a summer slowdown in sales. The shares fell as much as 12 percent in early London trading Thursday and were down 4.3 percent at 9:43 a.m.

The uncertainty wrought by Brexit has hurt big-ticket spending in the U.K. DFS has struggled this year amid weak consumer confidence and a subdued U.K. housing market. Floor-coverings retailer Carpetright Plc is shutting dozens of stores and tapping shareholders for cash to stave off collapse.

©2018 Bloomberg L.P.

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