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THG ends talks | Boohoo and ASOS shares slide

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10.30am: Wall St relieved, London nervous

“The initial market reaction to the largest rate hike by the US Federal Reserve in nearly 30 years was a sigh of relief,” says AJ Bell investment director Russ Mould.

“After last week’s US inflation shock the market had steeled itself for a big rise. Although the extent of the hike was so widely predicted ahead of time that you could be forgiven for suspecting possible leaking to help manage expectations.

“If so, job done as stocks bounced on the decision. It helped that the move was accompanied by some soothing words from Fed chair Jerome Powell, who characterised the size of the hike as unusual and not something he expected to make a habit of.

“He also did his best to allay fears of a recession. Although the predictive powers of Powell and his team have rather lost their credibility given how long they stuck with the line that inflation was transitory rather than something which was here to stay. 

“And perhaps it was this lingering concern over a global downturn which helped put pressure on the FTSE 100 this morning.”

Attention turned to today’s rate decision by the Bank of England and the FTSE 100 took a sharp turn downwards, trading 165 points lower at 7,108.78. Housebuilder Persimmon was the biggest faller, shedding 8.38%, while consumer stocks also fell.

The shine came off online retailers with Boohoo posting a slip in sales and rival Asos delivering a heavy profit warning as they face steep rising costs and an uncertain consumer backdrop.

Boohoo shed 7.55p, or 11.6%, to 57.24p after reporting that sales had fallen by 8% to £445.7 million in the three months to 31 May (see below).

Asos shares fell by 305.5p, or 26.34%, to 863p.

JD Sports and Next were 8.3% and 6.5% lower respectively.

B&Q owner Kingfisher lost 4.6% per cent, while FTSE 250-listed Frasers Group tumbled nearly 11%.

THG slumped 13% after one of its suitors walked away from bidding for the ecommerce retailer. Belerion Capital Group said it no longer planned to make an offer for the firm.


7am: THG terminates talks

THG

Ecommerce retailer THG says it will not proceed with any of the recent approaches for the firm which were “unacceptable and significantly undervalued the company”.

In a statement, it said all approaches had been unsolicited and “after consulting with THG’s major shareholders and taking advice from the Company’s advisors, the Board has not considered it appropriate to provide due diligence access to any of these parties,”

Accordingly, “the board has determined that it is not appropriate to seek an extension to the deadline set out in the company’s announcement dated 19 May 2022.”

The company had received an indicative non-binding proposal from a consortium led by Belerion Capital Group and King Street Capital Management which was rejected by the board.

“While THG is clearly aware of the macro-economic challenges, the company continues to perform well, and in line with its own expectations,” it said.


7am: Boohoo sales slide

Online fashion retailer Boohoo said UK sales slid fell 8% in the three months to the end of May but it returned to net sales growth last month. International performance continued to be impacted by increased delivery times.

The group has continued to increase sourcing from markets closer to home to reduce exposure to elevated inbound freight costs, with a 10 percentage point increase in short-lead time product mix compared to the same period last year.

Outlook for the year ending 28 February 2023 remains unchanged. Revenue growth for FY23 is expected be low-single digits, with a return to growth in Q2 and growth rates improving in the second half of the year. Adjusted EBITDA margins are expected to be between 4% and 7%, in line with prior guidance.


7am: ASOS reports uncertainty and board changes

ASOS’s guidance for the year was updated to reflect “uncertain consumer purchasing behaviour and the potential continuation of higher returns” with revenue growth expected to be 4% to 7% and adjusted PBT now expected to be in the range of £20m to £60m.

Mat Dunn, chief operating officer, said: What is now clear, based on the significant increase in returns rates that we have seen, is that this inflationary pressure is increasingly impacting our customers shopping behaviour.

“It is too early to tell for how long the current pattern of customer behaviour will continue but we are taking swift and decisive steps to minimise the impacts whilst continuing to deliver against the strategic initiatives we laid out in November that will ensure that ASOS builds for the long-term.

The company has promoted José Antonio Ramos Calamonte, chief commercial officer, to chief executive and appointed non-executive director Jørgen Lindemann as chair to succeed Ian Dyson.


Global markets

Asian stocks rose after the Federal Reserve decided to bump up rates by an aggressive 75 basis points to tackle soaring inflation. In Tokyo, the Nikkei was up 1.7% and Seoul’s KOSPI added 1.24%.

Wall Street closed higher, after five losing sessions, even through Mr Powell signalled that the central bank could raise rates again by the same magnitude next month.

Stocks would normally react negatively to aggressive central bank measures and the bullish response was attributed to Mr Powell’s cautious stance during the press conference.

The Dow Jones Industrial Average rose 1%, while the S&P 500 gained 1.5% and the tech-heavy Nasdaq Composite rose 2.5%.

Earlier, European stocks moved higher following news of an emergency meeting of the European Central Bank’s rate-setting Governing Council later in the day in response to the turmoil in euro area government bond markets.



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