Investors find some warmth in Next’s chilly forecast

london — British clothing retailer Next reported a first drop in annual profit since 2009 and said it was “extremely cautious” about prospects for the year ahead but its battered shares rose on relief that the view has not deteriorated further.

Britain’s most successful clothing store chain for a long time, Next has faltered over the last two years, saying it is suffering from a broader slowdown in spending on clothing and footwear that it first identified in late 2015.

It has also cautioned that sales could be depressed this year by a squeeze in consumer spending as inflation begins to erode real earnings growth, and by price rises on garments due to the devaluation of the pound. However, its shares rose as much as 9.3 per cent on Thursday, paring year-on-year losses to 38 per cent, as investors took comfort from Next maintaining the guidance it issued in January when it warned that profit would fall again in 2017-18.

They also welcomed what Next CEO Simon Wolfson called “pockets of good news” in the results statement. He highlighted work to improve Next’s ranges and online service as well as a stabilisation in the firm’s credit customer base. Wolfson said Next had also “stresstested” its store portfolio which concluded that opening new space was still a sound strategy. “[Next’s] valuation now offers support, despite the challenges,” said Investec Securities analyst Alistair Davies, who upgraded his stance from “sell” to “hold”. —