ASOS CEO quits as market tightens | Heathrow traffic falls
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5pm: Markets price in interest rate rise
At the close, the FTSE 100 index was 51.30 points, or 0.7% higher at 7,146.85, the day’s peak and well above the session low of 7,085.85, as traders price in the prospect of an earlier than expected interest rate rise.
It was a bad day for online fashion retailer ASOS which issued a profit warning and parted ways with its chief executive (see below), sending the shares 13% lower to 2,407p.
Danni Hewson, AJ Bell financial analyst said: “The optimism created by summer freedoms is giving way to a nagging concern that this winter really could be a discontented one, that many people might struggle rather than prosper and all those opportunities might be out of reach for very different reasons to last year.
“Rising prices, gaps on supermarket shelves and warnings that this is the thin end of the wedge has already prompted many to price in an interest rate rise before the end of the year; the latest voice added to the din is Bank of America.
“On London markets today its clear there’s a real difference between the outward facing FTSE 100 and the more domestically focussed FTSE 250. Whilst miners, banks and energy companies are shoring up the former after a decent surge on Asian markets the latter hasn’t quite been able to shake off that inflationary wobble.
“Across both indices, consumer facing stocks like TUI, Tesco and JD Sports have slipped back, with investors considering that consumer spend won’t hit the heights that had been hoped for this Christmas season.”
7am: ASOS warns on profits
Online fashion chain ASOS said chief executive Nick Beighton is to step down. His departure comes amid slowing growth and in spite of a bullish sales target.
Mat Dunn, CFO, will take on the additional role of chief operating officer and lead the business on a day-to-day basis, with Katy Mecklenburgh, currently director of group finance, to support as Interim CFO.
Ian Dyson, who will lead the search for a new CEO, is to become chairman, replacing Adam Crozier whose decision to step down was previously announced.
ASOS has unveiled plans to become a £7bn revenue business over the next three to four years, but it has scaled back its profit forecast for next year.
Adjusted pre-tax profit for the year to the end of August came in 36% higher at £193.67 million.
The company acquired four brands from Arcadia, including Top Shop and Miss Selfridge, and saw group sales grow 22% to £3.9bn, with exceptional growth of 36% in the UK. Sales grew 21% in the US.
However, it said`: “We do not expect any COVID-19 benefit in FY22 with returns rates having returned to more normal levels. We anticipate notable cost headwinds, particularly in the first half, from higher inbound freight and outbound delivery costs. We also anticipate inflationary pressures particularly with respect to labour across the year.
“As a result we expect profit in the range of £110m to £140m, compared to £126.3m in the prior year (excluding the COVID-19 benefit).
Russ Mould, investment director at AJ Bell, said: “The near-term outlook is somewhat bleak for ASOS. Sales growth is expected to slow quite dramatically; cost pressures and supply chain problems could remain intact for a while, which means profit margins will be squeezed; and consumer uncertainty could result in volatile trading patterns.
“ASOS is guiding for pre-tax profit in the year of £110 million to £140 million, which is 35% below the market consensus forecast of £193 million if you take the mid-point of the profit range.
“ASOS seems to have found it hard to keep up with the fast fashion movement in recent years, coming under criticism for not being able to turn around new product designs quickly, experiencing warehouse problems and poor stock availability. “
7am: Heathrow traffic figures
Passenger numbers at Heathrow remained at just under 40% of pre-pandemic levels in September, whilst EU rivals enjoyed stronger resurgence over summer.
North American traffic is only 25% of 2019 levels. Cargo, which is carried in the hold of passenger planes, was close to 8% down by volume on 2019. Heathrow said this “reflects the way in which travel restrictions have been damaging UK exports and supply chains.”
The company urged the UK government to show leadership by putting the policies in place to scale up the production of sustainable aviation fuels in the UK.
CEO, John Holland-Kaye said: “We should aim for 2019 to have been the peak year for fossil fuel use in global aviation.
“The UK Government can show real leadership in decarbonising aviation at COP26, by setting a progressively increasing mandate and a plan to use contracts for difference to accelerate the transition to Sustainable Aviation Fuel in the UK, which will protect the benefits of flying for future generations.”
Trade figure fall
Scottish exports fell by 14% in the year to June 2021 compared to the previous year – the highest in the UK.
England, Wales and Northern Ireland also saw a decline in exports – by 2.2%, 13% and 6.1% respectively.
Interest rates could rise earlier than expected, says Michael Saunders, an external member of the Bank of England’s Monetary Policy Committee.
New chief economist Huw Pill and the governor Andrew Bailey are also leaning in that direction, encouraging the markets to factor in such an outcome before the end of the year.
While Europe and the US ponder inflation pressures, Asia’s main markets opened the trading week in positive mood.
Tech stocks rallied after an online shopping platform escaped touher sanctions from Beijing for alleged monopolistic practices.
Travel stocks are regaining height after the opening of more corridors.
China’s Shanghai Composite gained 0.41% while Hong Kong’s Hang Seng index surged 2.25%
In Japan, the Nikkei 225 jumped 1.55% but South Korea’s Kospi dipped 0.11%.