By Geoffrey Smith
Investing.com -- Shares in the U.K’s two biggest online fashion names slumped on Thursday after Asos slashed its guidance, while Boohoo’s (LON:BOOH) quarterly results lived down to expectations.
ASOS (LON:ASOS) stock fell 20%, as it warned that “uncertain consumer purchasing behavior and the potential continuation of higher returns” forced it to cut its sales growth forecast for the current year to a range between 4% and 7%, and its pretax profit to a range of £20 million to £60 million ($25 to $75 million).
It warned that the cost of living crisis in the U.K. had led to a sharp rise in returns by customers, and said continued pressure on input costs, notably for freight and promotions, had led gross margin to decline by over 3 percentage points in the quarter to 44.0%.
Sales growth of 15% in the U.S. and 4% in the U.K. was offset by a 2% drop in the EU and 8% in the rest of the world.
Boohoo shares meanwhile fell 11.5% to a new six-year low after its quarterly results confirmed the gloomy guidance it gave a month ago.
Revenue fell 8%, with supply chain issues ensuring that it failed to capitalize on the reopening of the U.S. economy in the quarter. U.S. sales fell 28%.
Like Asos, Boohoo complained of higher freight costs, which had led to wait times for products rising 10% from a year earlier.
One bright spot was that it said sales in the U.K., which still account for over half of sales, strengthened in the course of the quarter and returned to year-on-year growth in May. Gross margin also improved during the quarter but was still down 220 basis points from a year earlier at 52.8%.
Asos also provided a silver lining to its update, ending a period of uncertainty at the top with the appointment of José Antonio Ramos Calamonte as chief executive officer. Jorgen Lindemann, currently a non-executive director at Asos and chairman of Danish-based Miinto, will become chairman in August when Ian Dyson steps down.