ASOS PLC (LSE:ASC) and Boohoo Group PLC (AIM:BOO) profits are set to be hit by weakened demand, increased competition and at-risk margins, analysts have warned.
Following lacklustre results from both online fashion retailers in the last month, Shore Capital has forecast more gloom for the groups this summer despite some promising data.
Veteran retail analyst Clive Black explained that summer holiday bookings appear strong based on data from On the Beach and SSP Group, the operator of food outlets at travel locations.
While he believes this bodes well for summer clothing sales - should the UK be blessed with warm weather - he doesn’t believe it justifies buying shares in the fashion retailers.
“We would suggest investors consider travel stocks instead,” Black said.
He added that despite improving consumer confidence and robust unemployment in the UK, household spending remained under pressure because of the high-interest rates environment.
Additionally, pressure from larger rivals such as Shein, who compete aggressively on price, continues to eat away at both group’s revenues.
Shore Capital has therefore cut Asos’ full-year profit guidance from £85 million to £67 million, predicting that margins will now slip to 2.2% rather than 2.8%.
For Boohoo, the broker has slashed 2025 earnings guidance by 15%, citing a weak run rate into the new financial year.
Asos is rated a ‘sell’ with a fair value of 255p by Black and Shore Capital, while Boohoo has been given a ‘hold’ rating at 35p.