A profit warning by stock market darling ASOS (ASC) has caused a big sell-off of retail stocks today amid fears that the High Street faces a disastrous Christmas. Shares in Asos crashed 40% in early trading today after the online fashion giant said it suffered a ‘significant deterioration’ in sales in the crucial run-up to Christmas. In an unexpected trading update, Asos said sales jumped 14% over the last three months, but admitted that trading faltered in ‘the important month of November’, with conditions remaining ‘challenging’. It has slashed its full-year sales and profit forecasts as a result. That added to fears of carnage for retailers this Christmas, having a knock-on effect on other high street retailers. Shares in online rival Boohoo.com (BOO) fell 12% – that’s despite the firm publishing its own update, in which it said trading is ‘comfortably in line with market expectations’ following record Black Friday sales. Other retailers took a hit too: high street bellwether Next (NXT) was also down about 4%, while Marks & Spencer Group (MKS) and Primark owner Associated British Foods (ABF) were down by about 2.6%. Shares in Mike Ashley’s were down 1%, while JD Sports Fashion (JD.) fell by about 4.8%. Debenhams (DEB) fell by nearly 7%, French Connection Group (FCCN) shares fell 4% and Dixons Carphone (DC.) was down 2%. Last week, Sports Direct boss Mike Ashley said November was ‘unbelievably bad’, and Primark said sales were softer than expected. Meanwhile, Bonmarche Holdings (BON) claimed the ‘unprecedented’ conditions were worse than during the recession. But while the High Street is clearly under the cosh, today’s warning from Asos serves as a stark reminder that even online firms are vulnerable to the brutal trading conditions.
Ashley (Laura) Holding (ALY) is set to shut down 40 branches as a report has found disappearing shops have cost 93,000 jobs across the UK. Becoming the latest retailer to retreat from the High Street after a string of high-profile closures, the company said it expects to reduce the number of its UK stores from 160 to 140. Laura Ashley’s latest closures add to the 40 retail units it has already shut down since the beginning of 2015. New chairman Andrew Khoo said he wanted to have fewer, but maybe larger, stores and expand further into China. ‘The direction I want to go is to have not so many stores, but maybe the ones we have could be larger. It’s more about showcasing the brand,’ Khoo told the Press Association.
Energy giant SSE (SSE) has called off its planned merger with Npower, blaming the Government’s price cap and ‘challenging market conditions’. SSE said it has been unable to agree terms on financial support for the new company and added that it will now consider spinning off or selling its retail arm. The tie-up to create the second-biggest energy company in the UK behind British Gas was first thrown into doubt last month, when the company warned about ‘some uncertainty’ around the deal, due to the incoming cap on default tariff prices. The deal was given the green light by the competition watchdog in October. It would have seen SSE’s energy unit, which provides gas and electricity to households, removed from the main group, allowing it to focus on gas and electricity transmission. SSE said it was now considering a standalone demerger and listing, a sale or an alternative transaction for its household energy division. SSE shares fell 1.5% to 1,073p in morning trading.
A shareholder in Just Eat (JE.) has lashed out at the food delivery firm today, dubbing it the ‘worst-performing public equity in online food delivery’ as it called for a radical overhaul. Cat Rock Capital, which has a 2% stake in the firm, issued a savage plea to Just Eat’s board to ‘address key issues’ and sell off non-core assets, including its interest in iFood business in Brazil and other non-European businesses. The US investment firm urged Just Eat to devise a three-year financial plan, or else consider ‘strategic alternatives for the business’. It comes after a torrid year for the firm’s shares, which have tumbled almost 30% in 2018 to trade near the same price as two years ago – despite 100 per cent sales growth over the period. Indeed, Just Eat has recently been demoted from the FTSE 100 index.
Thousands of jobs are set to be axed at Jaguar Land Rover in the New Year as it clambers to turnaround the business. JLR – Britain’s largest carmaker – could cut as many as 5,000 roles from its 40,000 workforce, claims the Financial Times. The firm has embarked on a two-year cost-cutting exercise as it suffers from sliding demand for diesel and poor sales in China. It is expected to reveal details of the job losses in January when it sets out its short-term strategy to revive its fortunes. JLR has already slashed 1,000 jobs from its factory in Solihull. JLR declined to comment.
A total of 93,000 retail jobs have been lost in the past year amid a crunch on the High Street. There have been a string of high-profile store closures as shoppers desert town centres and flock to web titans such as Amazon instead. Analysis by the British Retail Consortium shows there were 3 million people working in retail in September, the most recent month for which figures are available, down from 3.1 million a year earlier. Household names Marks & Spencer Group (MKS), Debenhams (DEB) and House of Fraser have all announced store closures, while others such as Maplin, Toys R Us and Poundworld went bust this year. Tough trading conditions triggered by the rise of the internet and a temporary squeeze on living standards after the Brexit vote are behind the crisis.
The chairman of Debenhams (DEB) has delivered an ultimatum to Mike Ashley inviting him to make an offer for the entire chain of department stores – if he is serious about wanting to take control. In an interview that will send shockwaves across the High Street, which is facing its toughest ever Christmas period, Sir Ian Cheshire challenged the owner to stump up the cash for a formal takeover bid. Billionaire retail tycoon Ashley was infuriated last week when the Debenhams board rejected his unsolicited offer of a £40 million loan, which was widely interpreted as a backdoor attempt to position himself to take control of a business in which he already owns 29.7% of the shares.
Outsourcing giant Interserve (IRV) is preparing to spin off its lucrative building materials division in a bid to reduce its debts. The struggling firm is looking at handing over the unit, called RMD Kwikform, to a group of lenders which hold its £600 million debt pile. A sale of the division is expected to enable the group to become more focused on its core business, support services. RMD Kwikform is thought to be worth about £300 million. There is speculation over the future of government contractors after Carillion failed this year, with fears that rival Interserve could be next to go bust. RMD Kwikform makes equipment used to build concrete structures.
MIDAS SHARE TIPS – : Christmas has come early – if you fancy a festive investment. Midas Verdict: Findel has been through hard times but Maudsley and his team are committed to delivering growth. The company now offers customers an enticing blend of value-based e-commerce with credit attached and the education business is recovering too. Veteran stockpicker Andy Brough of Schroders is a big fan, recently taking his stake to almost 19%, while six members of the board bought shares last month too. At £1.77, the shares are a buy.
