ASOS PLC (LSE:ASC) and Boohoo Group PLC (AIM:BOO) are both facing downside on the back of ever-increasing competition in the UK’s online fashion sector, analysts have said.
Coupled with a resurgence in high street shopping and ongoing cost of living pressures, each face tough outlooks, Shore Capital analysts said in a note on Friday.
“Like the rest of the UK online fashion market, ASOS is likely suffering tough competition from players such as Shein, a robust M&S and Next family assortment as well as second-hand disruptors like Vinted,” analysts wrote.
Alongside this, “the sector has been disrupted by the return of the high street post-pandemic,” analysts continued, with soaring inflation hitting younger people’s pockets in particular.
Attitudes toward fast fashion have also changed as consumers increasingly favour ethically sourced and environmentally friendly goods, Shore Cap said, adding further pressure.
Shore Cap cut forecasts for both as a result, with Boohoo expected to face a 15% decline in sales and ASOS suffering a 9.4% decline in revenue this year.
Both metrics should return to growth from 2025, analysts acknowledged, adding work needed to be done by the retailers, which each suffer from being solely online, before then.
“Frankly, ASOS and Boohoo have to demonstrate that they are in control of their own destinies [and] that they can achieve sequential improvement in financial performance,” the bank said.
A ‘sell’ rating was reiterated for ASOS, while Shore Cap kept a ‘hold' rating for Boohoo, adding it saw shares in each falling 15% and 4% respectively over the year.