Asos has warned that full-year profits are set to be towards the bottom end of guidance after weaker-than-anticipated summer sales.

The online fashion retailer, which has struggled in recent times with sliding demand, anticipates underlying earnings of £40million to £60million for the 53 weeks ending 3 September.

It reported like-for-like turnover fell by 11 per cent on a constant current basis during the period following a continued slowdown in orders across multiple markets.

Although warm weather drove strong sales in June, fourth-quarter revenues declined by 15 per cent as rain damaged trade in July and August.

Asos has also been affected by elevated cost-of-living pressures, higher customer returns, supply chain troubles, and a widespread post-pandemic drop in the e-commerce sector.

Still, it expects the final three-month period to be profitable thanks to £300million of recent cost savings and improvement in core profitability as part of its ‘Driving Change’ turnaround programme.

Lower duty and freight costs helped the London-based firm more than double its second-half gross margins, although they came in below guidance because of significant discounting activity to reduce inventory levels.

Despite slashing its stock by 30 per cent last year, the business expects price cuts to remain until late 2024 as it aims to eliminate inventory from last year’s autumn/winter season.

José Antonio Ramos Calamonte, chief executive of Asos, said: ‘We continue to focus on bringing the best fashion and the most engaging proposition to our customers as we make progress on our journey to sustainably profitable and cash-generative growth.’

Asos was relegated from the FTSE 250 Index in June, having seen its market cap plummet in the previous two years from over £7billion to less than £500million.

Sales on its website soared during the height of the pandemic when the temporary closure of apparel stores due to lockdown restrictions produced a major windfall for online retailers.

Growth subsequently slowed as customers returned to purchasing their clothes on the high street, and cost-of-living problems hurt its young-adult target audience.

The company has also faced stiffer competition from the likes of Marks & Spencer, Next and Chinese fast fashion giant Shein.

Pressure on Asos has seen it become a potential takeover target, with Turkish online retailer Trendyol putting forward a £1billion approach last December.

Another potential suitor is Mike Ashley’s Frasers Group, the owner of Sports Direct and Evans Cycles, which has built a near-17 per cent stake in the brand.

Russ Mould, investment director at AJ Bell, said: ‘The danger for Asos is it is just no longer as relevant in a world where people can buy clothes in stores again and where the tide has turned away from the whole fast fashion concept.

‘And by failing to fix the roof while the sun was shining bright for it during the pandemic, the business is left really exposed.’

ASOS shares were 1.5 per cent, or 5.8p, lower at £3.81 on Tuesday morning.

The FTSE 100 is down 0.4 per cent in early trading. Among the companies with reports and trading updates today are Aldi UK, Aviva and Entain. Read the Monday 25 September Business Live blog below.

> If you are using our app or a third-party site click here to read Business Live

The FTSE 100 is down 0.3 per cent in early trading. Among the companies with reports and trading updates today are Zegona, Compass Group, Mothercare, Investec, and Home REIT. Read the Friday 22 September Business Live blog below.

> If you are using our app or a third-party site click here to read Business Live

Warpaint London revealed record sales and profits in its interim results with the group believing it is ‘very well positioned for further growth’.

The company’s group sales increased by 46 per cent to £36.7million for the six months to 30 June, with UK revenue increasing by 28 per cent to £13.3million.

The firm’s adjusted earnings before interest, taxes, depreciation, and amortisation increased to £7.9million, up from £4.4million.

The cosmetics company said that statutory profit from operations had increased to £6.3 million, up from £3.5 million. 

It also revealed that its W7 brand sales were up by 67 per cent and Technic brand sales over the same time period.

Sam Bazini, chief executive of Warpaint, said: ‘I believe the group is very well positioned to achieve further growth and I remain confident that margins can be maintained going forward.

‘Warpaint is a global business with the capacity, expertise and strategy, coupled with balance sheet strength, to drive future growth from both our existing and new customers. 

‘As in previous years, the group’s sales are expected to remain second half weighted, reflecting Christmas seasonal sales as well as ongoing momentum.

‘We look forward to updating further as the year progresses, and with significant opportunities for continued growth, both already secured with our existing retailers and in discussion with additional major retailers globally, I am confident that the group will continue to perform well for the remainder of the year and beyond.’

Founded by Eoin Macleod and Samuel Bazini three decades ago, Warpaint’s initial business model involved purchasing and selling surplus stock from top brands such as Revlon and Max Factor to high-street firms, wholesalers and discounters.

In 2002, the company launched W7, which now provides over half of all revenues and is popular among younger people with smaller budgets.

Its other brands include Man’stuff, Chit Chat and Retra Holdings, a make-up gift business acquired by the group in November 2017 for £18.2million. 

Warpaint shares were down by 0.68 per cent to 300.45p in morning trading on Wednesday.

Ocado customers are once again buying more goods after a string of price cuts won back middle-class shoppers.

The online supermarket said sales over the three months to August 27 were 7.2 per cent higher than 12 months earlier at £569.6million.

Crucially for the company – and its partner Marks & Spencer at the Ocado Retail arm – shoppers bought more items in August than in the same month last year.

This was the first rise in volumes since the depths of the Covid-19 pandemic when lockdown restrictions led to a boom in online food deliveries.

In a further boost, Ocado Retail boss Hannah Gibson hailed the firm’s ‘great momentum’, adding: ‘We have started the final quarter positively.’

Ocado shares rose 1.6 per cent – taking its gains for the year to 30 per cent – while M&S gained 2.7 per cent. 

Its stock has risen more 80 per cent this year, earning it a place back in the FTSE 100 index after a four-year absence.

Signs of recovery at the Ocado Retail business will be a welcome relief for bosses there and at M&S. 

At Marks’s annual general meeting in July, chairman Archie Norman said he was ‘not happy’ with the performance of the joint venture, which sees M&S food sold through the Ocado website.

Tim Steiner, co-founder and chief executive of the Ocado group, which includes its technology business as well as the retail joint venture with M&S, also admitted the results of the tie-up have been ‘disappointing’ and that the business was ‘not where we wanted it to be’.

Russ Mould, investment director at AJ Bell, said yesterday’s figures suggest ‘things are looking up’.

Ocado said it received an average 381,000 orders per week in the third quarter – up 1.9 per cent on a year earlier – with customer numbers up 1.5 per cent to 961,000. 

The average value of shoppers’ baskets rose by 4.2 per cent or £4.87 to £120.72 but the number of items dropped once again from 45 to 44.

‘The average basket size is still shrinking, which means it is not a full house for Ocado in terms of progress,’ said Mould.

Ocado said it expects the retail business to be back in the black in the second half of the year following a £2.5million loss in the first. 

Gibson said high household bills were still a concern for the grocer’s well-heeled customer base.

At the start of September, Ocado announced its third round of price cuts since June and has made more than 630 reductions.

Gibson said: ‘Value matters incredibly to customers at the moment. 

‘The cost of living is a very real thing for many customers. It’s not a past tense.’

Despite the recent reductions, prices increased by 8.4 per cent on average across its products in the third quarter, although Ocado said this was ‘considerably’ below wider levels of grocery inflation in the UK. 

Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: ‘All attention now turns to the final quarter, where festive trading starts to ramp up, and this should give a clear indication into the consumer confidence of Ocado customers, and settle the debate about how resilient Ocado’s offering really is – with volumes taking centre stage.’

 Among the companies with reports and trading updates today are Ocado, Kingfisher, Trustpilot, Tui, Henry Boot and Hargreaves Lansdown. Read the Tuesday 19 September Business Live blog below.

> If you are using our app or a third-party site click here to read Business Live

Trainline shares soared on Tuesday after the group revealed a £50million share buyback following better-than-anticipated growth in the first half.

The digital railcard platform’s net ticket sales increased by 23 per cent to £2.65billion for the six months ending August, while turnover rose by nearly a fifth to £197million.

Ticket purchases jumped to over £1.7billion in the firm’s UK consumer division as more customers booked online and on the day of travel.

It further benefited from passenger volumes regularly nearing pre-pandemic levels amid an absence of Covid-related restrictions and commuters travelling with greater frequency to the office.

This was despite workers from the RMT and Aslef unions staging strikes on multiple days as part of a long-running dispute over pay and conditions, costing the group around £5million to £6million in lost sales per day.

Outside Britain, ticket demand soared by approximately a quarter to £559million on the back of solid performances in Spain and Italy.

In recent years, trading in Italy has been supported by new advertising campaigns, while the company’s expansion in Spain has been spearheaded by the liberalisation of the country’s high-speed rail system.

Digital sales slowed overseas partly due to higher competition in keyword auctions, although demand continued to rise significantly on the company’s mobile app.

Jody Ford, chief executive of Trainline, said: ‘Given our continued growth and the strength and maturity of our business, we are today launching a share buyback programme to begin returning capital to shareholders.’

Trainline has maintained its guidance for both net ticket sales and turnover to expand by 13 to 22 per cent for the 2024 financial year. 

Meanwhile, adjusted core earnings are expected to total between 2.15 per cent and 2.25 per cent of net ticket sales.

Following the update, Trainline shares jumped 12.4 per cent, or 30.6p, to £2.78 on Thursday morning, making them the biggest riser by far on the FTSE 250 Index.

However, their value has still fallen by about 24 per cent over the past year.

Russ Mould, investment director at AJ Bell, said: ‘There remain limited barriers to entry in this market, but Trainline’s brand is becoming increasingly entrenched, which should provide it with a measure of protection from any prospective rivals.

‘The company continues to focus on innovative features like flagging cost savings through splitting your journey into multiple tickets that cost less in total than one ticket for the whole route.’

Bumper online demand helped toymaker Hornby rebound over the summer following a disappointing result last year.

Internet sales from April to the end of August jumped by more than a third on the equivalent period last year, the Margate-based company told investors on Thursday.

Consequently, revenues and margins were stronger and commensurate with the firm’s predictions for a ‘low double-digit’ expansion in turnover for the 2024 financial year.

However, the model railways manufacturer cautioned the result would depend on its performance during the critical Christmas trading season.

The group’s sales rose by 2.5 per cent to £55.1million for the 12 months ending March 2023, which was dampened by softer-than-forecast demand between October and December amid an uncertain economic backdrop.

Although trade improved in the final quarter, rising fixed costs meant Hornby swung to a £5.9million loss, having recorded a £1.5million profit the prior year.

In addition, the company’s debts climbed following an excessive stock build-up as manufacturing output grew to its highest-ever levels.

Even though progress had been made in curtailing old stock, Hornby acknowledged that inventory volumes remained high in late August due to the planned accumulation of new supplies ahead of the peak Autumn sales period.

Founded in 1901 by Liverpudlian businessman Frank Hornby, the company’s model train brands include Jouef, Lima and Electrotran, but it also sells Scalextric car racing sets, Corgi cars and Airfix model planes.

During the previous decade, the firm financially struggled as it endured several years of losses caused by declining interest in model collecting, issues with foreign suppliers and tougher competition from rivals.

This led to a turnaround plan launched in 2016, which included a share placing, a scaling back of overseas operations, and cuts to product ranges and investments.

Phoenix Asset Management acquired a majority stake in Hornby six years ago and appointed a new chairman and chief executive to steer the recovery.

Sales only began a significant revival when tough lockdown restrictions introduced in the wake of the Covid-19 pandemic led many families to take up new hobbies.

Hornby shares were flat at 16.5p on early Wednesday afternoon but have slumped by around 42 per cent so far this year.

Britain’s largest home builder Barratt Developments has revealed a slump in demand driven by the mortgage crunch, with new home reservations sliding by a third

The housebuilder’s annual results revealed an increase in its pre-tax profits and revenue but it flagged that new home reservations had tumbled since July from an average of 0.6 homes per week to 0.42 homes per week.

In a July trading update, Barratt revealed that it had built 17,206 homes this year, down 3.9 per cent annually, but it now expects to build almost a quarter less next year – with a forecast of between 13,250 to 14,250 units.

Despite the murky outlook, the Leicestershire-based builder revealed revenue was up by 1 per cent to £5.3billion for the year ending 30 June 2023, in line with expectations, and statutory pre-tax profit rose 9.8 per cent to £705.1million.

David Thomas, chief executive of Barratt Developments, said the rapid rise in mortgage rates as the Bank of England has hiked base rate from 0.1 per cent to 5.25 per cent in under two years was taking its toll. 

The average five-year fixed mortgage rate hit a peak of 6.37 per cent in July, but has since slipped back to 6.19 per cent. Two years ago the average five year fixed mortgage rate was 2.75 per cent. 

Thomas said: We have delivered a strong operational performance in a challenging operating environment.

‘Customers continue to face cost of living and mortgage affordability challenges, and new developments are increasingly constrained by an ineffective planning system.’

Barratt revealed it would cut is final dividend to 23.5p from 25.7p last year and stall share buybacks but added that it had net cash of £1.06billion on its balance sheet. 

Barratt Developments shares were down 1.94 per cent to 434.70p in morning trading on Wednesday. 

Sentiment on housebuilders has been hit as rising interest rates have significantly impacted the housing market, with City forecasters saying the Bank of England’s base rate could peak as high as 6.25 per cent as it tries to bring inflation to heel.

But housebuilders have continued to profit from high house prices, with Barratt revealing that its average private sale price was up 7.9 per cent annually to £367,000. However, Barratt added that this number had slowed from 13.6 per cent in the first half of its financial year to 3.2 per cent in the second half.

Richard Hunter, head of markets at Interactive Investor, said: ‘All things considered, Barratts is playing a decent hand with the woeful cards being dealt to them in the current environment.

The list of headwinds is well-documented and lengthy and is likely to spill over into the new financial year. 

Squeezed mortgage affordability and availability is resulting in waning customer demand, while broader concerns over general economic growth, consumer confidence and spending are all darkening the picture. 

‘At the same time, the removal of the Help to Buy scheme has removed an important plank from first-time buyers and legacy costs for remedial building work continue to come at a significant cost, totalling some £179 million in this period.

He added: ‘The uncertain outlook is reflected in the shareholder return announcement, traditionally a sign of management confidence. 

‘There will be no further share buybacks over the coming period, while the dividend has also been reduced as the group intends to retain its cash to buffer against the upcoming challenges. 

‘Despite the dividend reduction, the projected yield of 7.6 per cent remains punchy given the economic backdrop and will continue to catch the eye of income-seeking investors.’

A solid recovery in summer holiday travel has led WH Smith to shrug of the impact of rail strikes as sales boomed at airports and it expands in the US.

Turnover at the High Street come travel hub retailer increased by 28 per cent for the 12 months ending August.

First-half revenues expanded at over double the rate they did in the following six months, due to the former period lapping the Omicron variant’s emergence a year earlier.

WH Smith’s travel business continued to benefit from the removal of the last pandemic-related curbs at home and overseas, enabling Britons to head abroad again.

WH Smith also credited its ‘focused in-store strategy’ for delivering higher average transactions and expanding the range of products on offer from categories like technology, health and beauty.

Sales at the company’s UK travel hubs climbed by more than a third, and it said that revenue was boosted not just due to rising airport trade but also a strong performance by its hospital-based outlets.

The firm said demand also remained resilient at its rail channel despite footfall being impacted by railway workers staging a series of strikes over pay and conditions.

Meanwhile, travel sales grew by 31 per cent in North America, where the group boosted its market share and opened another 43 shops, while they nearly doubled throughout the rest of the world.

This offset a modest drop in sales at its traditional high street operation, which has struggled for some time with underinvestment and significant competition from retail giants like Amazon.

Carl Cowling, the firm’s chief executive, said in late June that the company would not be opening any more UK high street shops in order to focus on overseas expansion and travel hubs.

The Swindon-based retailer expects to open over 80 new shops by August 2024, with around half launching in North America. 

Analysts at RBC Capital Markets said: ‘We believe WH Smith’s forensic approach to retailing should stand it in good stead to expand successfully in the global travel essential retail segment.

‘We remain attracted to its longer-term growth potential in captive travel retail markets, which may offer consolidation potential longer term.

‘Consumer demand for travel remains strong, and [WH Smith] should be helped by its relatively low basket size in a tougher consumer environment.’

For the last financial year, WH Smith has predicted the travel business would provide over 70 per cent of revenue and approximately 85 per cent of profit from trading operations.

Analysts anticipate the firm making £143million in annual pre-tax profits, compared to £61million the previous year.

WH Smith shares were 5.6 per cent, or 83p, lower at £14.01 on Wednesday morning, meaning they have slumped by 46 per cent since the beginning of 2020.