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Young people cutting back on summer clothing purchases as they miss out on holidays and festivals because of Covid-19 restrictions have contributed to a slowdown in sales growth at Asos.
“Many young people will spend as much on their holiday wardrobe as they do on the holiday itself,” said chief executive Nick Beighton. Every time the government announces changes to Covid rules, “the demand profile changes” among the online fashion group’s Instagram-obsessed customers.
Asos’ share price fell as much as 14 per cent on Thursday after the company said sales growth had softened in recent weeks.
“There has been no return to things like holidays and festivals that [younger consumers] had been expecting following the original ‘freedom day’,” added Beighton, referring to June 21, the date on which the last remaining Covid-related restrictions on daily life in England were to be lifted.
That date was put back to July 19. In the intervening weeks, case rates have soared — UK-wide cases topped 40,000 on Wednesday for the first time since January — and there has been little relaxation of rules on overseas travel.
Ibiza and Mallorca, popular destinations among young holidaymakers, were put back on the amber list on Wednesday, meaning that from next week those returning from the islands will have to quarantine at home for 10 days.
Festivals such as Glastonbury and BST Hyde Park have also been cancelled, postponed or scaled back.
“The lives of twentysomethings are being disrupted by the shifting sands of the pandemic,” said Beighton. “It is completely impossible for them to plan anything.”
Younger workers are also far more likely to be employed in the kind of jobs that involve direct contact with others, such as hospitality, logistics and retail, and Beighton said that “pinging” of his own staff by the NHS Test & Trace app was on the rise.
“There is a lot of pinging, both in the warehouse and in London. It is very frustrating for them and for us because even people who are double-jabbed have to self-isolate,” he said.
Asos said trading in recent weeks had softened and that it expected sales in the final quarter of its financial year to grow at a similar rate to the 15 per cent reported for the same period a year ago. Analysts at Investec had been expecting growth of more than 20 per cent for the final quarter.
Return rates, which had been suppressed during the pandemic as consumers bought different types of clothing, are also reverting to more normal levels. The cost of processing returns lowers operating profit margins, although the company stressed it was not changing its full-year profit expectations.
Asos’s statement contrasted with Kingfisher, which released an unscheduled trading update on Wednesday evening. The DIY conglomerate has been a pandemic winner and its second-quarter sales were better than expected as homeowners — generally older than the core Asos customer — continue to spend money on their homes and gardens.
UK sales in its second quarter to date were up 3.3 per cent on the same period a year ago and a quarter above 2019 levels. It now expects first-half profits to be between £645m and £660m against a previous range of £580m to £600m.
Its shares were up 1.8 per cent in early trade.
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