Next to post profits fall as high street remains in doldrums
A consensus of City analysts are pencilling in an 8% fall in annual pre-tax profits.
Next is expected to report a drop in full-year profits this week as the high street remains under extreme pressure from a consumer spending slowdown.
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A consensus of City analysts are pencilling in an 8% fall in annual pre-tax profits to £725 million and the figures will come at a time of growing concern for brick-and-mortar retailers.
As well as the administrations of Toys R Us and Maplin, Debenhams, Mothercare and Carpetright have all issued profit warnings this year.
To compound matters, a spate of firms including Jamie’s Italian, burger chain Byron and Prezzo have shut hundreds of stores as consumer confidence dives in the face of Brexit-fuelled inflation.
Next has not been immune from the malaise, but the clothing chain posted a surprise rise in sales over Christmas and upgraded its profit forecast.
Next said full-price sales in the 54 days to December 24 increased 1.5%, ahead of expectations, with part of the improvement down to much colder weather leading up to Christmas.
As a result, Next upped its full-year profit guidance by £8 million to £725 million, although the figure is still a long way off last year’s £790.2 million.
Sales at its high street outlets declined 6.1% and George Salmon, equity analyst at Hargreaves Lansdown, said: “Next’s Christmas trading update showed high street sales continuing to suffer.
“That’s a trend that looks set to continue, but the outlook for next year has improved.”
Next chief executive Lord Simon Wolfson, a prominent Leave supporter, has previously said that Next will look to reduce costs by renegotiating rents with landlords and controlling wages and man hours.
He also said that inflationary pressure will ease throughout 2018.
Mr Salmon added: “The group expects sales growth to firm up as online continues to deliver good results.
“Meanwhile, cost inflation is expected to ease, and then disappear, over the course of 2018.
“All that bodes well – higher sales and higher margins mean doubly higher profits in the longer term.
“However, retail still accounts for a huge slice of sales, and with conditions remaining tough, it’s likely to be far from plain sailing.”