UK's Asos To Lower Prices For Driving Growth

UK's Asos To Lower Prices For Driving Growth

Asos Plc shares tumbled the most in almost four months as the sales growth forecast from the UK's largest online-only fashion retailer disappointed investors.

Sales will increase by 20-25% in its 2017 financial year, the London-based company said in a recent statement. That implies a slowdown at constant currency rates, according to analysts. "Much of this expansion is now priced in and, given the investment made in the globalisation of the business, is not without risk," they believe.

Investors had bet it would be one of the few British retailers to benefit from the UK's decision to leave the European Union.

The slump in the pound is a boon for Asos, as it pays for more than 80% of the clothing it buys in pounds and about 57% of its sales are made outside of the UK. Asos has used the savings from the drop in sterling to cut prices for international customers in an effort to win market share in Europe and the US.

"We can lower our prices with confidence because we are an export business and we will prosper from the weaker pound," Chief Executive Officer Nick Beighton said. Given Asos's plan to lower prices to drive growth, its targets are conservative, according to Jamie Merriman, an analyst at Sanford C. Bernstein.

"We expect that as the year develops, management may need to raise sales guidance upwards," she said in a report.