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Friday 20 September 2019

Next first out of the traps as retailers reveal Christmas results

Analysts at Jefferies forecast the fashion chain will downgrade its profit expectations.

Next is the first to report as the high street suffers (PA)
Next is the first to report as the high street suffers (PA)

By Ravender Sembhy, Press Association City Editor

Retailer Next is expected to begin 2019 with a downbeat Christmas trading update when it reports to the market next week as high street stores are braced for another year of turmoil.

Analysts at Jefferies forecast the fashion chain will downgrade its full-year profit guidance when it reveals festive figures on Thursday.

The broker expects the update to show a 12.7% fall in store sales in the run-up to Christmas as mild winter weather and Brexit batter the firm.

Jefferies’ James Grzinic explained: “The combination of mild weather and Brexit-induced UK consumer weakness is bound to have impacted Next’s Christmas performance.”

As a result, he tipped Next to cut its full-year profit guidance by 3% when its Brexit-backing chief executive Lord Simon Wolfson releases the results.

Current guidance for annual pre-tax profit stands at £727 million but Jefferies is pencilling in a figure of £705 million, down from last year’s £726 million.

The only bright spot will be Next’s online arm, which is expected to record a sales rise of 10%, according to Jefferies.

The update comes at a difficult time for the retail sector, with recent data from Springboard suggesting footfall on Boxing Day plummeted 3.1%.

Even online has not been spared, with Asos issuing a pre-Christmas profit warning following a dire November.

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HMV has appointed administrators (Jonathan Brady/PA)

Music chain HMV became the first high street casualty on Friday when it appointed KPMG to carry out an administration.

It caps a torrid year for retailers.

Notable high street names such as Poundworld, ToysRUs and Maplin have all gone bust in 2018, while the likes of Marks & Spencer and Debenhams have announced plans to shutter stores.

Several others, including Superdry, Carpetright and Card Factory, have issued profit warnings.

High street retailers have been battling the rise of online shopping, higher costs and plummeting consumer confidence as shoppers rein in spending amid Brexit uncertainty.

Lord Wolfson was a prominent Leave advocate during the Brexit referendum.

In October, Next reported sales growth had slowed in the third quarter as both high street and online trading eased back.

The fashion and homewares chain recorded a 1.3% rise in full-price sales for the three months to October 27.

But high street retail sales tumbled 8%, while online sales rose 12.7%.

Mr Grzinic also predicts more pain in 2019 as Brexit continues to take its toll.

“Looking at the early months of 2019, much of the outlook continues to be dictated by what shape the Brexit discourse will take,” he said.

“Whether UK consumers take full advantage of their improved ability to spend (with disposable income growth currently at 3%) will depend on politicians steering the Brexit process through calmer waters.”

Among the bevvy of firms reporting festive figures over the coming weeks are Morrisons, Sainsbury’s, Ted Baker, Tesco, Marks & Spencer, John Lewis, Debenhams and Dixons Carphone.

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