More than £190m was wiped off the value of online fashion group Asos on Tuesday after the retailer issued its third profits warning in six months as it struggles to conquer new territories.
N Brown and Boohoo.com also saw their shares slide after the former tinkered with its marketing plans and investors worried that the online fashion chains might struggle to find profitable growth, particularly in international markets.
Shares in the one-time stockmarket favourite Asos sank nearly 9% to £22.07, less than a third of their value in February, as it admitted it would have to invest more in technology and in cutting prices in overseas markets because the high value of the pound was making its clothing look expensive in key markets including the US and Russia.
Total sales rose by 15% to £240m over the summer compared with the same period last year, boosted by a healthy 33% increase in the UK which still accounts for 41% of Asos's business. But sales in overseas market rose just 6% as growth in the US completely stalled and sales went into reverse in the rest of the world outside Europe.
The group warned that profits for its 2015 financial year were likely to be the same as this year at about £45m because of the need to invest in lowering prices overseas and the technology necessary to enable it to alter prices by country. Analysts polled by Bloomberg had been expecting a recovery to £63m next year.
Asos said that a fire at its main warehouse in June had reduced sales by between £20m and £30m but the impact of that problem would be covered by insurance.
Asos' chief executive, Nick Robertson, said the business remained "focused on the long term opportunity," adding that the company had attracted a quarter more active customers.
But analysts said the figures were disappointing and some suggested Asos was facing increasing competition from rivals such as Zalando, the German online fashion store in which Asos shareholder Anders Holch Povlsen also owns a large stake, as well as high street retailers including Topshop and Zara. Robertson said there hadn't been major changes among the competition, but Zalando had had "the biggest impact".
"After this update, in particular the revision to [next year's] forecasts, there will inevitably be questions over the robustness of the company's model, particularly its development strategy overseas," said retail analyst Freddie George of Cantor Fitzgerald in a note.
Fellow online fashion store N Brown also saw its shares slide 5% to 385p as it admitted that changes in the timing of marketing and a cutback on sales of less profitable, but high value, electrical products, had hit sales. Underlying sales at the group, which owns the Figleaves, Simply Be and JD Williams brands, slumped by 4.6% in the three months to the end August, as sales of home and gift items dived 9% and spending on marketing using traditional catalogues was slashed by nearly a quarter. In the previous quarter the group had recorded 2.5% growth.
Its chief executive, Angela Spindler, admitted "August was below where we wanted to be," but said the company would still meet its profit target. "We are confident we are doing the right thing to modernise the business and create a platform for growth. We don't have underlying performance issues," she insisted.
But analysts worried that warm weather in September would continue to depress sales despite the screening of the first TV campaign for JD Williams' led by new brand ambassador Lorraine Kelly this month.
An analyst at Investec Securities, Kate Calvert, said the decline in sales in the last three months had been worse than expected. She said: "Investors are unlikely to give this 'jam tomorrow' story the benefit of the doubt."
