The latest news shows that retailers can’t rely on online operations to make up for a decline in stores this year. If December doesn’t improve, the New Year may bring more profit warnings, or worse, to the sector.

(Bloomberg)—Europe’s retail crisis is spreading from bricks-and-mortar stores to e-commerce as Asos Plc  Holdings plunged the most in 4 1/2 years after warning that Christmas shopping got off to a disastrous start.

The gloomy update from a U.K. online retailer that competes with Amazon.com Inc. and has furnished fashions to the likes of Meghan Markle shows that retail weakness is widespread in the run-up to the holidays.

Asos, No. 20 in the Internet Retailer 2018 Europe 500, fell as much as 43% Monday in London, wiping more than 1.4 billion pounds ($1.8 billion) off the market value. The news dragged down other online retailers like Boohoo Group Plc (No. 182) and Zalando SE (No. 6), as well as store operators like Marks & Spencer Group Plc (No. 26) and Next Plc (No. 21).

“This goes against the script,” said Stephen Lienert, a credit analyst at Jefferies. “It was supposed to be bricks and mortar that’s dying and online is the future, but that headline gets ripped up today.”

Asos cut its full-year sales-growth guidance on a “significant deterioration” in November. The company cited a high level of discounting, which comes as the continuing Brexit saga undermines consumer confidence in the U.K. while French shopping districts are suffering from sometimes violent protests by the so-called Yellow Vests.

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Last week, Sports Direct International Plc (No. 50) CEO Mike Ashley said sales were “unbelievably bad” in November, sending the shares off a cliff. The latest news shows that retailers can’t rely on online operations to make up for a decline in stores this year. If December doesn’t improve, the New Year may bring more profit warnings, or worse, to the sector.

Retailers such as Debenhams Plc (No. 30) and Marks & Spencer, which are in the midst of turnaround plans, may be particularly vulnerable. The U.K.’s shopping districts have already been decimated by a series of collapses, including the insolvency of department-store chain House of Fraser (No. 62), which Ashley rescued earlier this year.

Investors in retail debt are also feeling the pain. Debenhams’ 200 million pounds ($252.2 million) of bonds due July 2021 have plummeted 35 pence on the pound since the start of the year to 64 pence, the lowest since the notes were sold in 2014, according to data compiled by Bloomberg.

Asos cut its outlook for full-year growth to about 15%, from a previous range of 20-25%. It’s a sharp turnabout for a company that had grown rapidly, its market value at one point rivaling Marks & Spencer before plunging to 2.1 billion pounds ($2.65 billion) on Monday.

The warning dragged down Hennes & Mauritz AB (No. 73), whose shares dropped as much as 7%. The struggling Swedish clothing retailer reported its fastest quarterly sales growth in three years Monday, though analysts said the performance stemmed too much from discounting, favorable currency shifts and an easy base for comparison.

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Last week Inditex SA (No. 14) of Spain, which runs the Zara chain, pointed out the high level of discounting in the clothing retail industry and said it’s trying to resist lowering prices. That led to sales growth below its target at the start of the second half.

Zalando and Boohoo

Zalando plunged as much as 18% while Boohoo fell as much as 20% before paring losses. After the warning from Asos, Boohoo issued a statement confirming its performance remains strong and within market expectations. Zalando regained some ground after a spokesman said fourth-quarter sales are “good” and the German online retailer remains optimistic it can meet the outlook targets that it reaffirmed last month.

The disappointing sales at Asos reflect a broader trend among consumers, without a single clear driving force, CEO Nick Beighton said on a call with reporters. France—where a trade group says the Yellow Vest protests have cost retailers close to 2 billion euros ($2.26 billion) in lost sales—and Germany were particularly weak, he said.

“It’s more than just the Brexit-related factors,” Beighton said.

In a survey of 350 German retailers, about half reported being disappointed with business so far this holiday season, the German Retail Federation said in a statement Sunday. Almost a third of retailers reported being satisfied. Businesses located in city centers were particularly gloomy in their assessments.

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Robust U.S.

The trend is playing out differently in the U.S., where a growing economy, low fuel prices and rising wages have prognosticators expecting this holiday shopping season to be one of the best since the recession. Americans spent a record $7.9 billion online on the Monday after Thanksgiving in November, up more than 19% from last year, making it the largest digital shopping day of all time in the U.S., according to Adobe Analytics.

Amazon.com Inc. (No. 1 in the Internet Retailer 2018 Top 500) reaped a lot of those rewards, recording its biggest shopping day in history, but so did more traditional retailers like Walmart Inc. (No. 3) and Target Corp. (No. 17).

Asos operates in more than 230 countries and territories, with about 37% of sales in its domestic market. About half of its business is own-brand merchandise or exclusive collaborations with third-party labels. The company also sells goods from the likes of Hugo Boss, Adidas and Calvin Klein.

The plunge in Asos may have been magnified by the presence of short sellers, who borrow shares hoping to buy them back at a lower price and profit from the difference. Short interest in Asos stood at almost 8% of outstanding shares on Thursday, the highest level since May 2015, according to data compiled by IHS Markit Ltd.

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