Shares in Footasylum have plummeted this morning after the company said it will make a loss in the first half of the year.
The sportswear retailer said that squeezed margins and higher investment costs would weigh on earnings for the full year, while revenue is now expected to be below market expectations.
Shares fell 47 per cent to 44.5p in early trading.
In the six months to 25 August, total revenue grew 18.5 per cent to £98.6m. Although this was a result of increased revenue in all income channels, wholesale and online outstripped stores.
Bricks and mortar store revenue grew 12.4 per cent to £66.3m, while online jumped 28.5 per cent to £30.2m. Wholesale revenue tripled to £2.1m.
Why it's interesting
This is the second downgrade issued by the company this year. Its share price looks on track to halve in value again today, after already falling from 167.5p to 79p in June.
Footasylum said that its sales on the high street had been "disappointing", impacted by weak consumer sentiment and delays in its programme of store openings and upsizings.
But the company is pressing on with its refurbishment plans, including several technology projects, ahead of the busy Christmas period. Six new store openings and enlargements will be ready just in time for Christmas shoppers.
Footasylum is pursuing the idea that increasing the footprint of some key stores will improve its relationships with big brands and make for a better customer experience.
Analysts at Liberum said that these initiatives should eventually deliver some improvement, but that this second downgrade was "highly disappointing".
What Footasylum said
Executive chairman Barry Brown said: "These are undoubtedly challenging times in the retail industry and, in common with many other businesses, Footasylum's trading has continued to be impacted by weak consumer sentiment. On top of that, increased clearance in stores has led to a reduction in gross margin, and we have also had some unforeseen delays in our new store openings and upsizes.
"However, we have continued our programme of investment, both in upsizing our stores and in our digital capabilities, and are working hard on a number of initiatives to maximise the company's performance during the upcoming peak trading period."