Business World

Tuesday 25 October 2016

Brexit concerns as retailer Next warns on profits amid sales slump

Ravender Sembhy

Published 05/05/2016 | 02:30

First-quarter sales fall by 4.7pc as fashion retailer fears slowdown in consumer spending this yearfor
First-quarter sales fall by 4.7pc as fashion retailer fears slowdown in consumer spending this yearfor

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

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

Next also said the lacklustre figures could indicate a wider slowdown in 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," the company said.

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

Next cut its annual full-price sales guidance to between minus 3.5pc and plus 3.5pc, also warning that pre-tax profit could fall by as much as 8.9pc to £748m (€943m).

Its estimate at the higher range is a 3.7pc rise to £852m.

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 30pc 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," she added.

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