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Thursday 13 December 2018

Next to update market as high street sales come under pressure

The pound’s demise since the Brexit vote has seen costs rocket for retailers and shop prices rise.

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By Ravender Sembhy, Press Association City Editor

Retailer Next is expected to reveal another poor showing from its high street stores next week as consumer confidence continues to deteriorate following the Brexit vote.

Analysts at HSBC forecast the clothing chain will report a 5.3% fall in third quarter sales at its bricks and mortar outlets when it announces results on Wednesday.

It comes after sales across Next’s high street stores fell by 8.3% over the first half and amid a sharp slowdown in retail sales across the country.

A recent CBI survey showed sales in October fell at the quickest rate since March 2009 – the height of the financial crisis – as Brexit-fuelled inflation hammers retailers and shoppers alike.

The pound’s demise since the referendum has seen costs rocket for retailers and shop prices rise as already struggling consumers are hammered.

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Lord Simon Wolfson interview

However, the retailer’s overall performance is expected to have been propped up by its Next Directory arm, where sales are predicted to grow 10%.

This, HSBC said, will see Next book a total increase in sales of 1.8%.

George Salmon, equity analyst at Hargreaves Lansdown, added: “Having missed the mark with its ranges earlier in the year, we’ll be looking out to see if Next, and more importantly its customer base, is happier with the Autumn/Winter offering.”

The group, headed by Brexit backing Lord Wolfson, struck an upbeat tone at its half year results in September when it claimed the worst of the inflation-fuelled price hikes on the high street are over.

It led Next to upgrade its earnings outlook after what it called “encouraging” trading, despite pre-tax profits falling 9.5% to £309.4 million for the six months to the end of July.

Lord Wolfson said at the time that it was “not impossible” that high street sales could rise in its third quarter, especially as it comes up against very weak comparatives from a year earlier.

He said: “Our performance in the last three months has been encouraging on a number of fronts and whilst the retail environment remains tough, our prospects going forward appear somewhat less challenging than they did six months ago.”

Next is now forecasting full-year profits of around £717 million, up from £710 million previously, although this would still mark a drop on the year before.

Paul Rossington, retail analyst at HSBC, said that trading will also “benefit from weak comparatives and better weather”.

However, he added: “Against a backdrop of an increasingly competitive UK market, Next’s core UK retail and UK directory businesses are in decline.”

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