News Column

Fashion retailers fall after profits warning

June 6, 2014

FORMER City favourite ASOS lost nearly one-third of its value today as a second profits warning in three months sparked falls among internet and fashion retailers.

The latest downgrade stemmed from the impact of a stronger pound on international sales.

The FTSE 100 Index slipped 5.1 points to 6813.5 during a session dominated by interest-rate decisions in Europe and the UK.

The European Central Bank (ECB) unveiled a package of measures aimed at getting banks lending in the euro zone, as it became the first major central bank to introduce a negative rate on overnight deposits.

This means banks will have to pay the ECB to deposit cash rather than receive interest.

The stimulus measures, including a cut in interest rates from 0.25 per cent to 0.1 per cent, came on a day when Bank of England policymakers voted to keep the cost of borrowing on hold.

As a result, sterling strengthened against the euro, at 1.23, while it also improved against the US dollar at 1.68.

In corporate news, the warning from ASOS that it has increased promotional activity in the womenswear sector meant Primark owner Associated British Foods fell 14p to 3034p and Next declined 5p to 6640p.

Outside the top flight, ASOS rival fell 4.5p to 45p and Superdry firm SuperGroup dipped 12p to 1098p.

ASOS shares slumped by as much as 40 per cent at one stage, although recovered as the session wore on to close 31 per cent or 1403p lower at 3120p.

In the FTSE 100 Index, shares in medical devices firm Smith & Nephew surged amid speculation that a second potential suitor has been looking at a takeover of the business.

Medtronic is the latest name to be linked to the Hull-based firm, just days after US firm Stryker was forced to confirm that it had no current interest in a takeover bid. Shares in S&N were up 24p to 1088p, a rise of more than two per cent.

Housebuilder Persimmon was the biggest faller in the FTSE 100 Index after Halifax recorded the strongest monthly uplift in house prices since 2002, fuelling expectations that the Bank of England will take steps to cool the current property boom.

Shares fell more than five per cent or 70p to 1262p, although Bellway was 31p higher at 1436p after it reported an 11 per cent rise in its weekly reservation rate.

In corporate updates, AO World fell five per cent in the wake of its maiden set of results. The online appliances retailer reported an 11 per cent rise in underlying earnings to pound(s)11.2 million and said it had started the new financial year in line with expectations.

However, the impact of the profits warning from ASOS meant shares fell 13.3p to 248p.

The biggest risers in the FTSE 100 were Meggitt up 23.4p at 517.5p Smith & Nephew up 24p at 1088p, Ashtead up 17p at 917p and United Utilities ahead 15p at 883p.

The Dow and the S&P 500 ended at a new record on Thursday after the European Central Bank (ECB) cut rates to record lows and pledged to do more if needed to fight off the risk of deflation.

The Dow Jones industrial average rose 98.58 points or 0.59 per cent, to 16,836.11, the S&P 500 gained 12.58 points or 0.65 percent, to 1940.46 and the Nasdaq Composite added 44.59 points or 1.05 per cent, to 4296.23.

The ECB cut the deposit rate to -0.10 percent and launched a series of measures to pump money into the sluggish eurozone economy.

It stopped short of full-fledged quantitative easing, but ECB President Mario Draghi said more action would come if necessary. Inc revived speculation about its next major product on Wednesday, using a mysterious YouTube video and website post to tease a June 18 "launch event" in Seattle to be hosted by CEO Jeff Bezos. The stock jumped 5.5 percent to $323.57.

Sprint has reportedly agreed to pay about $40 per share to buy T- Mobile US, marking further progress in the attempt to merge the third and fourth-biggest US mobile network operators. Sprint shares fell 4 per cent to $9.02 while T-Mobile US dropped 2.3 per cent to $33.49.

Rite Aid shares slid 7.4 per cent to $7.87 after it estimated first-quarter profit much below expectations.

Ciena Corp shares jumped 18.4 per cent to $22.48 after the company posted earnings that beat expectations and gave a revenue outlook above forecasts.

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Source: Herald, The (Scotland)

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