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Next warns on profits as cold weather hits clothing sales

Published 04/05/2016

Next said the lacklustre figures could indicate a wider slowdown in consumer spending
Next said the lacklustre figures could indicate a wider slowdown in consumer spending

Retailer Next has warned that full-year profits could take a hit after sales for the first quarter fell 0.9%.

Sales at the chain's high street shops plunged 4.7% as it pointed to March and April's cold weather dampening demand for its clothing.

The company also said the lacklustre figures could indicate a wider slowdown in consumer spending.

"The poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and potentially wider slowdown in consumer spending," Next said.

Sales at the Next Directory catalogue business also slowed, coming in at 4.2%.

Next cut its annual full-price sales guidance to between minus 3.5% and plus 3.5%, also warning that pre-tax profit could fall by as much as 8.9% to £748 million.

Its estimate at the higher range is a 3.7% rise to £852 million.

While Next said that this week's better weather had seen an improvement in trading, it nevertheless warned that it is possible that "sales will deteriorate further".

Chief executive Simon Wolfson warned in January that 2016 would be challenging after the firm reported a sales slump over Christmas.

Julie Palmer, partner and retail expert at Begbies Traynor, said: "Previously an example of stability in an otherwise rocky UK retail sector, Next has without doubt hit a rough patch, announcing its third cautionary statement in a row.

"Adding to its woes, Next has failed to maintain the support of its historically loyal shareholder base, with the group's share price plummeting more than 30% since the start of the year, as investors seemingly took their profits and ran.

"Worryingly the upcoming EU referendum could further dampen the retailer's spirits as both consumers and investors alike take a more cautious approach to their finances ahead of the Brexit vote."

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