The European retail business witnessed the worst start to sales in the run-up to the holiday season. Asos Plc a leading e-commerce platform reported week sales as the continent sets up for the festive Christmas season. Asos’ shares fell as much as 43% on Monday depreciating the UK retailer’s value by $1.8 billion. The negative impact of the news could be seen on both online and offline retailers. Shares of online retailers in Boohoo Group Plc, Zalando SE plunged and store operators like Next Plc and Mark and Spencer also fell victim to the negative trend prevalent in the market.
Earlier, Asos cut its full-year sales growth forecast from 25% to 15% due to a significant deterioration in the sales owing to high discounts, low consumer confidence, and the economic uncertainty in place due to the ongoing Brexit saga. The retail business in the UK has received a huge setback this year and has witnessed major insolvency cases the biggest one in the form of department-store chain House of Fraser. Investors who have put their money on the line in the retail business are also feeling the heat with multiple retail bonds plummeting.
Other big losers in the market were Hennes & Mauritz AB whose shares plummeted by 7% amidst the crisis. However, on Monday, the Swedish brand reported that it recorded its fastest quarterly sales in three years. Experts believe the sales growth were due to excessive discounting and favorable changes in currency. The owners of Zara chain revealed that the major discounting in clothing retail industry is a currently the main cause for plunging profits in the market. The company revealed that unlike its competitors it resisted lowering the prices which was unlike the trend in the market. The decision helped the clothing chain exceed its sales target at the start of the second half of the year.
The major losers in online retail stores were Boohoo and Zalando. While Zalando shares fell by 18 percent, Boohoo witnessed a loss of 20 percent. Both the companies regained their ground after releasing statements that announced that their sales were strong and were within expectations.
The US retail sector is witnessing completely opposite trends with lowering fuel prices and increasing income contributing to the growth of retail business during the holiday season. Both online and offline retail stores benefitted from the trend with reports estimating that the American population spent over $7 billion during Black Friday sales this year.