Next cuts profit forecast after drop in full price sales

In a statement, Next said the 0.4% decline in the 54 days to 24 December was an improvement on the third quarter and better than the run rate for the full year. However, the company was expecting sales in the fourth quarter to grow year-on-year as the comparative numbers in 2015 were poor.
While Next’s total sales, including markdown sales, for the year to date are up 0.4% year-on-year, full price sales are down 1.1%.
Despite the difficult season, Next said stock for its end-of-season sale has been well controlled and down 3% on last year. However, sales in the end-of-season sale are down 7% year-on-year.
The company has now forecast that group profit for the year to January 2017 will be £792 million and said this may increase or decrease by £7 million depending on trade in January. This compares to the previous guidance of £785 million to £825 million.
Looking ahead, Next said the year ahead is likely to be challenging and added: “The fact that sales continued to decline in quarter four, beyond the anniversary of the start of the slowdown in November 2015, means that we expect the cyclical slow-down in spending on clothing and footwear to continue into next year.”
Next also warned that there may be a further squeeze in consumer spending as inflation begins to erode real earnings growth and that clothing prices could rise by “no more than 5%” following the devaluation of the pound last year.
The company is budgeting for Next brand full price sales growth in the year to January 2018 to be between -4.5% and +1.5% with pre-tax profit within the range of £680 million to £780 million.