ONLINE fashion retailer ASOS has issued its second profits warning in three months after the strength of the pound hits overseas sales and forced it into a rash of promotions.

Shares slumped by as much as 40% - wiping £1.5 billion from its market value - as it said growth in international revenues in the third quarter to the end of May was just 17%, compared to 48% in the same period last year.

The weakness prompted the retailer, which achieves a high proportion of revenues from womenswear, to ramp up promotions. These normally represent 3% of sales but this rose to 8%.

The offers were not enough to offset the decline in performance overseas - a market representing 60% of sales - where customers are finding ASOS products more expensive because of the strengthening pound, which has risen 10% over the last year.

Chief executive Nick Robertson admitted that its profit performance for the financial year was "not what we had hoped for" as the group slashed its expected underlying earnings margin from 6.5% to 4.5%.

With the company targeting £1 billion sales for the financial year, it implied a fall in profits from £65 million to £45 million.

It comes after the firm warned in March that the costs of new warehousing in the UK and Germany as well as start-up expenses in China would hit earnings. Half-year pre-tax profits fell 22% to £20.1 million.

Mr Robertson - who together with other executives is on a long-term bonus scheme tied to hitting tough financial targets by 2015 - said sales in the third quarter to the end of May were strong, up 25% across the group and 43% in the UK.

"However, sterling's continued strength has resulted in a slowdown in our international sales growth to 17%," he added.

It means that overseas growth has been slowing for four successive quarters. US turnover was up 17% in the latest period, compared to 59% a year ago, while EU revenues growth of 37% compared to a 56% lift for the same period 2013.

For the rest of the world, sales growth slowed to a trickle of 1% compared to 38% a year earlier.

Mr Robertson said the result was a higher proportion of sales in the UK and Europe, where margins are lower, and increased promotions.

ASOS, which stands for As Seen on Screen, is targeting annual sales of £2.5 billion. In the year to the end of August 2013 it reported total retail sales of £754 million.

Mr Robertson said: "Whilst our profit performance for this financial year is not what we had hoped for due to an unusual combination of factors, our accelerated investment in technology and infrastructure to support our £2.5 billion sales ambition is progressing.

"We are totally focused on rolling out the ASOS business model globally as the world's leading online fashion destination for 20-somethings."

Analysts at N+1 Singer said: "Today's news will come as a shock to many and is also worse than we had feared."

Asos has had a meteoric rise since it was was founded in 2000 to target the fashion-conscious by trying to emulate the styles of their favourite celebrities.

Sales rose by 40% in the last financial year and by 38% the year before that. The share price soared to 7111p earlier this year, more than doubling the company's value on the year before, but has since slumped amid profit concerns.