Next chief warns of 'exceptional uncertainty' after unhappy Christmas
The boss of high street giant Next warned that Brexit uncertainty would add to an "even tougher" year ahead as the chain sounded the alarm over sales and profits after a difficult Christmas.
Next shares tumbled 10% in a dismal start to the festive reporting season after it said annual profits to January 2017 were set to fall by around 3.6% and could plunge by as much as 14% in the next financial year.
The group said it was facing "exceptional levels of uncertainty" amid a consumer spending squeeze, soaring costs from the weak pound and "little visibility of the approach the UK Government will be taking to Brexit".
Chief executive Lord Simon Wolfson - a prominent Leave campaigner - told the Press Association that while the Government was right not to be rushed into a Brexit plan, fears over the negotiations would heap further pressure on an embattled retail sector.
"It will take time for them and we have to be patient, but there will be uncertainty in the meantime," he said.
Shares fell across the retail sector as Next sparked worries of a dire Christmas and 2017 for fashion firms, with Marks & Spencer down nearly 5% and Primark parent Associated British Foods 4% lower.
Next - seen as a retail bellwether - reported a 0.4% fall in overall full-price sales for the 54 days to December 24, while it also posted a 7% plunge in end-of-season clearance sales.
Next said it suffered a 3.5% fall in full-price sales across its high street stores in the quarter so far to Christmas Eve.
It saw a better performance across its Directory catalogue arm, with sales up 5.1%, but this was not enough to offset the fall across its store estate.
The group had been hoping for a fourth-quarter turnaround after a difficult 2016.
But it said the end-of-year blow meant profits were expected to come in at £792 million for the 12 months to January 2017, depending on January trade, compared with previous guidance of £785 million to £825 million.
Lord Wolfson said 2017 was going to be "even tougher", with the group forecasting that its next year's profits could tumble to between £680 million and £780 million.
He said there was no immediate end in sight to the shift in spending away from clothing and footwear.
Heavy discounting among rivals in the run-up to Christmas was also affecting its January sales trade as fewer shoppers are hitting the high street, he added.
"I said 2016 would feel like we were walking up the down escalator; well, the escalator has just got faster," he said.
Next repeated warnings over cost pressures from the Brexit-hit pound, which the group has already said could see it hike prices by up to 5%.
This, together with a continuing downturn in spend on clothing, could see total full-price sales in the range of minus 4.5% to 1.5%, giving a central forecast of minus 1.5% for 2017/18.
Shares in Next and other retailers had already fallen on Tuesday ahead of the update after poor footfall figures suggested a poor start to the January clearance sales.
Richard Lim, chief executive of consultancy Retail Economics, branded the Next update "miserable".
He added: "These latest figures from Next confirm that underlying conditions on the high street remain desperate for clothing and footwear retailers."