Next shares under pressure amid ‘extremely volatile’ trading
Shares fell as much as 9% at one stage after the chain’s recent sales performance failed to meet City expectations.
Retail giant Next has warned over “extremely volatile” trading ahead of the crucial Christmas season as online sales continue to offset tough conditions on the high street.
Shares fell as much as 9% at one stage before paring back losses after the chain’s recent sales performance failed to meet City expectations, despite its second quarter in a row of rising total full-price sales.
The group notched up a 1.3% sales rise in the three months to October 29 – but saw a 7.7% plunge across its high street shops and said trading was “highly dependent” on the weather.
A 13.2% jump in sales at its directory arm helped push overall sales higher.
Including discounts, total sales rose 0.8% in the quarter.
Chief executive Lord Wolfson told the Press Association cautious consumers were only buying “as and when they need”.
He added a note of caution ahead of Thursday’s widely expected interest rate rise from 0.25% to 0.5%, which comes as households are being squeezed by surging inflation and paltry wage growth.
He said one quarter-point rise will not make a “huge amount of difference”.
“If it’s the beginning of a move towards significantly higher interest rates, then it won’t be a good thing for the consumer,” he said.
Investors took fright over Next’s cautious outlook as it said the weather was buffeting sales, with recent milder autumn weather putting sales under pressure after booming demand for warm clothing in a cooler August and September.
Next said its sales performance has remained “extremely volatile and is highly dependent on the seasonality of the weather”.
The group said this was making it hard to forecast sales ahead of key Christmas trading.
It believes a more “reliable guide” to the underlying trend is its year-to-date performance, which has seen full-price sales fall 0.3%.
The chain is also expecting total sales to slip back by 0.3% in its fourth quarter as it comes up against last year’s relatively strong Christmas quarter.
Next kept its central profit outlook for the year, at £717 million, which would mark a 9% fall on 2016-17.
But it narrowed its range to between £692 million and £742 million, from its previous guidance of between £687 million and £747 million.
In March, the group reported its first drop in annual profits since the financial crisis with a 3.8% fall to £790.2 million.
Since then, it has been overhauling its product ranges and upped its earnings outlook in September as it said its prospects were “less challenging” than previously expected.
Neil Wilson, a senior market analyst at ETX Capital, said: “Next had better hope that British shoppers are a little less fickle than the weather, because sales performance is so volatile the firm has no idea what to expect over the vital Christmas trading period.
“This is a worry, although there does seem to an improving trend in sales growth throughout the year.”