Asos slumps on profit alert as retail bloodbath spreads online. The travails engulfing the High Street on Monday spread online, with fashion giant ASOS (ASC) warning on profits. In an unscheduled trading update, the retailer admitted it was not immune to the difficulties experienced by its bricks-and-mortar peers. The shock warning sent Asos’ shares tumbling 41%, or 1712p, to 2474p, and triggered a sell-off in other retail stocks. Rivals including Boohoo.com (BOO) (down 10.3%), Debenhams (DEB) (5.8%), JD Sports Fashion (JD.) (5.2%), Brown (N.) Group (BWNG) (5.1%), Marks & Spencer Group (MKS) (4%) and Next (3.1%), all fell. The alarm comes after Mike Ashley warned on Thursday that other big retail names faced “being smashed to pieces” because Brexit jitters stopped shoppers from spending and fewer people bought coats and jumpers in November. Associated British Foods (ABF) – Primark, usually seen as one of the industry’s more resilient names, sent a shiver through the High Street the week before after it warned of “challenging” trading conditions. Analysts’ now expect other brands to follow suit. Sophie Willmott, a retail analyst at Global Data, said: “Considering two of the stars of British retail, Asos and Primark, have experienced a slowdown in trade in November, other mid-market players must be in dire straits.” Clothing brand Bonmarche Holdings (BON) saw its shares halve last week after it said it will make a loss of up to £4 million next year, down from an expected £5 million profits. Ashley (Laura) Holding (ALY) said it had too many shops, and plans to cut 40 of them in the UK. Asos, a former stock market darling, blamed the warning on the unseasonably warm weather in November as well as the “unprecedented” level of discounting by competitors. Chief executive Nick Beighton said the number of promotions was “something I’ve not seen before”. He added: “We’ve responded but we’ve not gone as far as we’ve seen in our peer group.” This wasn’t helped by “fragile” consumer confidence, which meant his customers were spending less or buying cheaper clothes. Sales were poor in France, Germany and Australia too.
SSE (SSE) on Monday abandoned plans to merge with Npower, blaming fiercely competitive markets and the new UK price cap for killing the deal. The merged business would have changed the UK’s Big Six retail energy firms into a Big Five, with a combined 11.5 million customers helping it leapfrog E.On to become the second-biggest energy provider behind British Gas. But SSE, which would have owned around two thirds of the combined business, said the deal was no longer in the interests of shareholders. Discussions are believed to have foundered on the amount of cash needed to put the new firm on a solid financial footing and secure a good credit rating, as well as the respective equity stakes in the business. While SSE’s retail arm remains profitable. Npower, a subsidiary of Germany’s Innogy, is loss making.
Battersea Power Station on Monday sealed a year-long £1.6 billion deal to get new owners amid worries that there will be construction delays. In January, Permodalan Nasional Berhad, a fund manager with £50 billion of assets under management, said it would buy a stake in the iconic building from Sime Darby and SP Setia, its current owners alongside the Employees Provident Fund. Monday’s sale, which will complete in the first quarter of next year, only involves the Grade II-listed building itself and the six acres of land it sits on, but not the rest of the 42-acre riverside site being developed. Battersea chief executive Simon Murphy said the shareholders are committed to the project — which will see shops, offices and flats on the site — and the building will be refurbished by the end of 2020. But Apple, which plans to make the building its London HQ, reportedly said it was eyeing temporary office space in case there are delays, and several Malaysian entities have faced troubles at home with a string of deals in which Malaysian sovereign wealth and pension funds had invested being probed over money-laundering concerns. In June, a senior Malaysian politician said the PNB deal should be investigated.
Just Eat (JE.) on Monday came under attack from a US activist investor, which called on the online takeaways giant to sell parts of the business and shake up management pay. Hedge fund Cat Rock Capital Management, which has a 2% stake in Just Eat worth around £80 million, claimed the firm has “become the worst-performing public equity in online food delivery globally”. The activist investor’s founder Alex Captain has written a letter to the Just Eat board. He said there is “shareholder frustration with management’s lack of accountability” for delivering on “significant growth potential”. The share price at Just Eat has slid by some 25% this year amid warnings it will invest more as competition from rivals such as Deliveroo and Uber Eats heats up
The Gym Group (GYM) on Monday opened its latest branch moments from Tottenham Hotspur FC’s new stadium, and told landlords it can help them fill space left vacant as retailers downsize or collapse. The listed firm’s new 16,000 square feet outpost will be next to Sainsbury’s on White Hart Lane in part of the building the grocer no longer needs. It will also launch a Monument site this month, bringing its estate size to over 150 gyms. The budget chain’s property director Jonathan Spaven said he is on the hunt for more London locations to open in next year.
Safestyle UK (SFE) was a notable riser. ES backed this stock in the minnows column just two weeks ago. The double glazing firm issued yet another profit warning, but investors have clung onto hopes of a recovery next year. The AIM-listed firm forecast losses in 2018 will be between £8.2 million and £8.6 million rather than the £6.3 million analysts had been expecting. But it seems the worst is behind it after a legal battle this year which managed to put an end to its biggest rival Safeglaze — started by its former founder Mitu Misra. Safeglaze was eating into the company’s market share and poaching its staff. That matter was settled in October and a confidential non-compete agreement with Misra signed. Since then Safestyle said orders have improved.
