European Retailers Crash as ASOS Collapses

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Shares in European retailer Asos are collapsing by 40%, most since June 2014, after the company reduced expectations for the current financial year.  Last time the shares traded this low was back in 2015/16. The company states it is experiencing a “significant deterioration” in the trading month of November and that conditions remain challenging. Guidance is slashed to 15% from earlier expectation of 20-25%. The move lower is absolutely astonishing.

Rest of the big European retailers including Marks & Spencer, JD Sports, Next and Boohoo are all falling big in London. The German giant Zalando is also joining the implosion of the retailers, and falls by 15% on Xetra.

In late September we warned about the sectors most vulnerable to the hard Brexit scenario. Among other sectors we explicitly mentioned retailers. We wrote;

Retail: An increase in consumer prices (see above) will lead to UK households having less disposable income to spend. The continued weakening of GBP would drive up costs for retailers as they import lot of the goods they sell. All of this would negatively affect consumer confidence which will hit the retail sector. Some of the companies in retail to follow are;

  • Next PLC (NXT LN)
  • Dixons Carphone (DC/ LN)
  • Marks & Spencer (MKS LN)

You can read about the other sectors and what stocks to watch out for with the Brexit saga continuing here.

 

Asos in free fall.

 

JD, Next, Marks and Spencer, Boohoo on a 3-day chart.

 

German listed Zalando falls by some 15%. The stock is down almost 60% from summer highs.

 

Not a pretty day to have your stock down 15% on a competitors warning. Don’t forget the number one holder of Zalando is the Swedish investment company, Kinnevik.

https://i.gyazo.com/d327c88a099e10cdb96ebc1430226f2a.png

 

Kinnevik stock is currently falling below the huge 220 support.

Talk about unintended consequences, running a global investment company with pretty much no UK exposure, but still feeling the pinch from the Brexit mess.

Source: charts by Bloomberg