Here’s why Asos and Boohoo share prices crashed

Boohoo (LON: BOO) share price crashed hard on Thursday after a major warning from Asos. The stock has dropped in the past six consecutive days and is now trading at the lowest level since July 2016. Its market cap has plummeted to about 728 million pounds.

Asos outlook sends shivers

Boohoo is a leading fashion company that sells its products in the UK, US, and other countries. The firm is going through a challenge of its lifetime as business conditions worsen.

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The cost of doing business in the fashion industry has jumped. That’s because the price of raw materials like cotton have surged. At the same time, wage costs have accelerated as the labor market has tightened. 

Boohoo is having to pay more for other important components of the economy like fuel. At the same time, the rising inflation has pushed people to change their buying preferences. Instead of buying clothes, many of them are spending on essentials like food and shelter.

All these factors explain why the Boohoo share price is in a freefall. And it is not alone. Asos share price plummeted by more than 16% on Thursday after the company published weak results and guidance. The company said that it was seeing its business struggle as costs rise. The company sees its revenue growing by between 4% and 7% this year.

Meanwhile, in another statement, Boohoo said that it has seen its UK sales decline for the first time on record. Sales dropped by 1% while the number of returns has been in a strong bullish trend. 

Boohoo and Asos are facing more challenges. For example, there is intense competition from Chinese companies like Shein. Shein is able to produce its products at a faster pace since it does not need to comply with the strict labor laws like those in the UK.

Boohoo share price forecast

The daily chart shows that the BOO share price has been collapsing in the past few months. The shares have moved from an all-time high of 438p to the current 57p. Along the way, the stock has moved below the important support level of 63p, which was the previous YTD low. 

Boohoo remains below the 25-day and 50-day moving averages while oscillators have moved to the oversold levels. Therefore, there is a likelihood that the stock will keep falling as bears target the next key support level at 45p.

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