Asos Shares Plunge 38% After Online Fashion Retailer Issues Profit Warning

Asos shares plunged nearly 38% in early trading after the online retailer issued a profit warning for the year.

Asos stock price sank to 2,830.00p as hefty investment, from previously announced expansion plans, is tipped to hit the group's overall profit margin for this year.

"Whilst our profit performance for this financial year is not what we had hoped for due to an unusual combination of factors, our accelerated investment in technology and infrastructure to support our £2.5bn (€3.1bn, $4.2bn) sales ambition is progressing and capital expenditure remains within guided levels," said chief executive Nick Robertson.

"All customer metrics -- active customers, new customers, order frequency and units per basket -- are positive and we are totally focused on rolling out the Asos business model globally as the world's leading online fashion destination for 20-somethings."

Chief financial officer Nick Beighton said full-year pre-tax profit will be around £45m, after lowering margins.

Last year the retailer posted a pretax profit of £54.7m to end Aug 2013.

Asos is a major online fashion retailer which sells more than 75,000 branded and own-brand products.

Meanwhile, Asos revealed that retail sales rose by 25% year-on-year (UK +43%, International +17%).

It also said it has 8.6 million active customers as of 31 May 2014, which is a 32% increase year-on-year, as well as strong balance sheet and cash position.

"Retail sales for the quarter were strong [with] particularly strong growth in the UK of 43%," said Robertson.

"However, Sterling's continued strengthening has resulted in a slowdown in our international sales growth to 17% (+28% at constant exchange rates).

"The resultant higher mix of UK and European sales, with lower retail margins, together with increased levels of promotional activity, leads us to reduce our EBIT margin guidance to c.4.5% from c.6.5% for the current financial year."