(Sharecast News) - Asos was under the cosh on Monday following a Sunday Times report that the online fashion retailer has privately told City analyst that it expects pre-tax profits for the year just ended to be towards the bottom end of the range given in June.
The retailer had said at the time that full-year pre-tax profit would be between £20m and £60m, having originally forecast profits of £110m to £140m. Asos blamed higher rates of customer returns.
According to the Sunday Times, Asos also indicated to analysts that sales in the coming year were likely to fall below consensus forecasts for 9.8% growth, leading one analyst to say they were "slightly uneasy" at the way it was managing expectations. A source close to Asos told the paper that pre-close calls were routine and no non-public information was shared.
Broker Shore Capital said: "While it is customary to entertain pre-close chats, and the company stated that no non-public information was shared, we are concerned about the potential of selective disclosure. According to the article, one analyst anonymously expressed unease at how Asos was managing expectations.
"This news comes after a series of negative updates: the announcement of the CFO's departure, the CMA launch of an investigation on 'green' claims, and suppliers' complaints regarding cancelled orders. It also adds to the pain of being exposed to mid-market brands and demographics particularly affected by the cost-of-living squeeze.
"Whilst market expectations in aggregate have not necessarily been adjusted, we would be very worried about the basis for an orderly market in the group's shares as discussions and research notes around forecasts were evident from deliberately selective conversations with analysts. As a result, we would take a very dim view of the possibility, never mind the reality, of such behaviour and reiterate our 'sell' rating."
The Sunday Times also reported that credit insurer Allianz Trade, formerly Euler Hermes, pulled cover last week for suppliers to Joules. Credit insurance protects suppliers against customers going bust between accepting an order and being paid. The withdrawal of credit insurance often prompts suppliers to demand money upfront, squeezing retailers' cash flow.
At 1020 BST, Asos shares were down 8.2% at 628.90p and Joules shares were 7% lower at 19.52p.
ASOS (ASC)
