Next warns of toughest trading since financial crisis and cuts sales forecast

Next Shop Front

Fashion retailer Next has warned that 2016 could be like “walking up the down escalator”, predicting its toughest trading conditions since the financial crisis and cutting its forecast for annual sales.

Reporting its annual results on Thursday, Next said it faced economic uncertainty, a weaker outlook for consumer spending, and also had to do more to improve its own operations.

“The year ahead may well be the toughest we have faced since 2008. In many ways we have more to do than ever before with complex challenges to our working practices across product, marketing and systems,” said Simon Wolfson, the Next chief executive. “It may well feel like walking up the down escalator, with a great deal of effort required to stand still.

“These wider consumer and economic trends may reverse as the year progresses. However our instinct, along with the volatility of our own sales, suggest that it would be sensible to prepare for a tougher economic environment.”

Next’s share price fell 6.6% to £62.15, the biggest early faller in the FTSE 100.

The Conservative peer’s gloomy outlook marks a turnaround for Next, which until recently had navigated its way through difficult trading conditions on the high street. Wolfson said the company needed to improve its products, marketing and systems.

Wolfson said the outlook for consumer spending was worse than a year ago.

Real earnings growth has slowed sharply since September and output across services, manufacturing and construction has weakened, Wolfson said. Consumers may also choose to spend cash on going out rather than clothing, he warned.

Wolfson said Next needed to overhaul its business, which suffered disappointing sales over Christmas due to warm weather but also through a lack of stock, greater competition for online sales and weak performance at its directory catalogue business.

Underlying pretax profit for the year to the end of January rose 5% to £821.3m as full-price Next branded clothing sales increased 3.9%. The company predicted sales of full-price Next brand items could fall by 1% or, at best, rise by 4% this year with a mid-point of 1.5%.

The forecast is a sharp reduction from January, when Next said it expected sales to rise by between 1% and 6%. Pretax profit will be £784m to £858m this year, the company said.

Powered by Guardian.co.ukThis article was written by Sean Farrell, for theguardian.com on Thursday 24th March 2016 08.22 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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