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From Bad To Worse

17 December 2018 by lberuti

Asos Plc is the UK’s largest online-only fashion retailer. It aims at a client base aged between 20-30 years, and offers branded and own label products across womenswear and menswear. Today, its shares plunged the most in more than 4 years after it cut its sales outlook. The company said its sales growth in the year ending in August will be about 15%, down from an earlier guidance of 20 to 25%. More specifically, November was “significantly behind expectations”. It pointed to the backdrop of economic uncertainty across major markets, together with a weakening in consumer confidence. These comments echoed statements made last week by Sports Direct CEO Mike Ashley who told analysts while discussing first half results that November was “unbelievably bad” for the sector. He added that “retailers can’t take that kind of November, it will literally smash them to pieces”. Needless to say that investors were quick to extrapolate what the consequences might be for NXTLN ( Next Plc ) and MARSPE ( Marks and Spencer Group Plc ). These two names were the worst performers in the European investment grade universe by a fair margin. Their risk premia widened by 23bps and 19bps to 163bps and 219bps respectively.