Next sticks to profits forecast despite tough third quarter

Next saw its high street sales fell 5.9% in the third quarter.
Photo: Paul Faith/PA Wire

Next saw its high street sales fell 5.9% in the third quarter. Photo: Paul Faith/PA Wire - Credit: PA

Retail giant Next revealed further trading woes yesterday as it reported a 5.9% fall in high street sales during the third quarter.

The fashion chain said full-price sales slumped as much as 7% in August in the wake of a large end-of-season sale the month before but it added that trading had improved since September, with full-price sales rising by 1.3% in October.

“In August full price sales were subdued following the much larger end-of-season Sale in July, and in September we traded against our best month last year,” Next said in a trading update.

“October sales improved significantly, as comparative weeks last year became less challenging.”

Overall sales across its stores and Next Directory arm fell 3.5% in the three months to October 31, with sales flat within the online and catalogue division. Next said the third-quarter performance had marginally lowered its central full-year sales expectations, with the group now forecasting a range from a fall of 1.75% to a rise of 1.25%.

Next boss Lord Wolfson said earlier this year that 2016 was set to be the “toughest we have faced since 2008”, warning over a shift in consumer spending away from fashion towards eating out and travel.

He also recently cautioned that Next may have to lift its prices by up to 5% next year as it faces surging import costs from the Brexit-hit pound.

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Fashion chains have also been knocked by an unseasonably warm start to autumn, which dented demand for warmer clothing ranges.

But despite the sales blow, Next said its central full-year profits outlook remained unchanged at a mid-point of £805m thanks to better-than-expected cost savings.

Its profits forecast range, from £785m to £825m, pencils in a worst-case scenario of a fall of 4.4% to a rise of 0.5% on the year before.

Analyst George Salmon, at Hargreaves Lansdown, said 2016 was becoming an “annus horribilis” for Next.

However, Jonathan Pritchard at Peel Hunt, said: “Like-for-like sales are still negative but not in free-fall, and we believe that there is pent-up demand in the clothing sector.

“These aren’t vintage times, but Next is in good enough form to ride that wave.”