On 16 September, the waning star issued its third profit warning in seven months, sending its shares crashing 215p (8.9%) on the day to 22.07p at one point the prices dipped as low as 20.03.
The current woes started back in March when ASOS warned that its venture into China was being hit by start-up losses and that annual profits would suffer as a result. That was compounded in June by the news that prices were being cut thanks to the strong pound in order to remain competitive in overseas markets.
Together, the three warnings have helped knock 70% off the ASOS share price since Februarys peak of 71.95. In fact, ASOS shares are now lower than their previous boom-and-bust peak of 25.08 back in June 2011.
And thats sad. But I think it was inevitable.
This time the shock has come from flagging overseas sales, and ASOS is going to have to cut prices further and invest heavily in infrastructure and technology. Instead of the previously-expected pre-tax profit of 62m, the company is now anticipating about 45m, below last year.
The real problem
But the real problem behind ASOSs boom and bust story lies deeper.
The thing is, ASOS really only ever had one thing going for it, and that was first-mover advantage. Others had tried to sell clothes online before, but the technology wasnt up to it and their low-bandwidth offerings failed. But the market really was there, and for a few short years ASOS pretty much had it all to itself and people saw those early meteoric sales rises and piled in.
But what moat did ASOS build around itself to keep the competition at bay? What barriers to entry are there stopping others selling their clothes online? What unique proposition does ASOS have to set it apart? I see none it just looks like an online shop that sells clothes.
Over the past two or three years, the retail sector really has caught up with the 21st century, and just about everybody has got online stores running. NEXT, possibly the UKs best clothing retailer, is seeing online sales soaring. And the rest of them are there in the UK Marks & Spencer, Debenhamsand all the traditional catalogue companies. And were seeing inroads being made by Boohoo.com.
And the same is true the world over, where the traditional retailers have a key advantage over ASOS they have their existing infrastructure of warehouses, stores and distribution networks already in place.
ASOS bulls point to the great potential for online shopping growth, and theyre right but its very competitive, and any assumption that ASOS is going to get the lions share seems horribly over-optimistic.
ASOS will almost certainly be able to get back to sales and earnings growth, but its unlikely to be at the breakneck pace that was needed to justify share prices of over 70!
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of ASOS. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.