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Asos is the latest in a string of pandemic winners to lose its shine, after the departure of its chief executive and a profit warning for the year ahead.
“We are not immune,” said Mat Dunn, Asos’s finance chief turned temporary day-to-day boss, pointing out that high-flying digital businesses that have done so well during lockdown are struggling from the same perfect storm of issues facing the wider retail industry.
Surging air and shipping costs, supply issues, warehouse labour and driver shortages, rising wages and customers returning more products have prompted jittery investors to wipe billions off the value of British e-commerce darlings.
“A year ago there was the widespread assumption that online retailers would continue to have their wicked way against their brick and mortar rivals,” said Russ Mould, investment director at AJ Bell.
“However, the last few months have shown that even for online retail there is no such thing as a free lunch. There is still a lot of hard work involved and we are seeing input cost inflation, logistic bottlenecks and public pressure on the issue of supply chains and sourcing. Most of these firms working to relatively tight operating margins are now finding it a lot more difficult, it’s a tough market.”
Boohoo
A big winner in the brand grab as traditional high street retailers succumbed to the pandemic, Boohoo snapped up household names including Debenhams, Dorothy Perkins and Burton. But a 64% slump in pre-tax profits in the half year to the end of August, pushing its share price down to half what it was a year ago, is testament to the difficulties the company is now facing. John Lyttle, chief executive, has pointed to a doubling of the cost of air freight to the US, and shipping costs for products from east Asia climbing three or even four fold, as well as the “most difficult year in terms of recruitment and wages”. The brakes have been put on the rate of sales growth, falling from 50% in the UK earlier this year to 19% in the quarter to the end of August.
AO World
Earlier this month more than £200m was wiped off the stock market value of the online retailer after it blamed driver shortages and supply chain problems for lower-than-expected profits. Sales target misses in the UK and Germany prompted a 23% slump in the Bolton-based company’s share price, making it the top faller on the FTSE 250 the day of the announcement, and its market capitalisation is down about a third from this time last year. The pandemic-fuelled £64m in pre-tax profits last year are now a memory, with the company telling investors to expect a level of between £35m and £50m this year.
Ocado
The online grocery delivery company reported its first ever sales decline in August, as the home shopping boom triggered by the pandemic lost some of its lustre as shoppers returned to stores as social distancing restrictions eased. Trading at close to £29 in January, investors have sent its share price down around 45% to £15.70 this year. Last month, Ocado said it expected to spend up to £5m hiring and paying delivery drivers and warehouse staff as labour shortages continue. The company’s performance has not been helped by a fire at its warehouse in Erith, caused by the collision of three robots, which caused Ocado to lose 300,000 orders.
The Hut Group (THG)
The Hut Group’s £4.5bn flotation last summer was the biggest listing in five years with the Manchester-based business hailed as a great British e-commerce success story. Riding the wave of the lockdown e-commerce shopping boom, the company’s share price touched highs of close to 800p in January, and as recently as August its billionaire founder, Matthew Moulding, continued his empire building buying beauty business CultBeauty for £275m. But a plan outlined in September to break up THG, and amid concerns over a general slowdown in online shopping, the loss-making company’s shares have fallen by almost 30%. It is currently trading at 428p, well below the level THG floated at a little over a year ago.
CMC Markets
The share price of the financial spread-betting firm run by city tycoon Peter Cruddas has slumped by a quarter over the last year as the boom in lockdown trading tapered off as pandemic restrictions eased. In September, the FTSE 250-listed firm issued a profits warning cutting its forecast of annual earnings by £80m, to between £250m and £280m, although the company says that while trading volumes have lightened overall customer numbers remain up about a third on pre-pandemic levels.
And a traditional retailer … Primark-owner ABF
With no online shopping service Primark’s business ground to a halt as the pandemic shut its stores. But the pent-up demand for the cheap fast fashion retailer’s clothes has fuelled record busting sales as shoppers return to the physical stores. Early summer sales surpassed pre-pandemic levels with more than half of its stores breaking sales records, with many offering extended opening hours to cash-in on the shopping revival. Parent company ABF’s share price is off just 6% over the last year. Primark’s sales struggled alongside the retail industry as a whole as shoppers stayed at home during the “pingdemic” in June and July. However, the company raised its profit guidance for its year to 18 September, and reassured investors that while it is experiencing some supply chain issues there is not going to be an issue of empty racks and shelves heading into the “golden quarter” sales period in the run-up to Christmas.
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