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What led Asos to issue a second profit warning and how is the stock reacting to the news?

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Shares of Asos (LON:ASC) are trading with gains of close to 2% on Friday after tumbling more than 23% in the previous session after the online fashion retailer issued a profit warning for the second time in seven months, citing IT and stock issues in its overseas markets. Asos, once a favourite among investors, has plunged more than 72% from its March 2018 peak of 7,770.00 pence. In December last year, the stock slumped more than 54% after it issued a profit alert. Despite chief executive Nick Beighton saying that the company would turn things around this year with a profit of £30-35m, the guidance was below analysts’ expectations of £55m and at a third of the firm’s profit of £102m in 2018.

Asos is in the midst of operational issues abroad. In Germany, the switch from manual to automated order processing led to operational failures. Meanwhile, in the US, the firm faced stock shortages after clothing manufacturers failed to deliver the products on time, leading to a lower than expected sales in Europe and the US. While analysts cite management credibility to be the key concern, it won’t be long before Asos takes a call on axing its chief executive.

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