The Courier & Advertiser (Fife Edition)
Next shares spike as investors breathe sigh of relief on outlook
HIGH STREET: Chain reveals first fall in profits this decade
High street giant Next has revealed its first fall in annual profits for eight years as sales hit the buffers.
The retailer posted a 3.8% fall in underlying pre-tax profits to £790.2 million for the year to January – the first fall in profits since 2008-09 at the height of the financial crisis.
Next confirmed it had hiked prices by 4% on average in the first half and warned price pressures would remain due to the weakened Brexit-hit pound.
Chief executive Lord Wolfson said 2017 was shaping to be a “tough year”.
“We remain clear on our priorities going forward,” he said.
“We will continue to focus on improving the company’s product, marketing, services, stores and cost control.”
Next saw overall sales fall 0.3% over the year, dragged lower by a 4.6% slump in full-price shop sales. Total sales fell 2.9% to £2.3 billion. The group said it was “extremely cautious about the outlook for the year ahead”, with sales in its first quarter likely to be around the “bottom end” of forecasts for a drop of up to 3.5%.
And it reiterated warnings made in January that full-year profits could fall by as much as 14% as it is braced for the impact of wage pressures, price rises and a shift away from clothing spending.
Lord Wolfson admitted last year’s sales woes were partly down to its product range, with its lines missing the wardrobe staples Next is renowned for.
He said: “In focusing so much energy on changing our buying culture, processes and adopting exciting new trends, we have omitted some of our best-selling, heartland product from our ranges.”
The group is overhauling its ranges, but the impact of the changes will not be seen until September.
It is also revamping its Next Directory offering.
Despite the profits fall, Next shares surged as much as 9% at one stage as investors breathed a sigh of relief that the chain had not downgraded its forecasts for the year ahead.
George Salmon, equity analyst at Hargreaves Lansdown, said Next had been hit by internal and external factors.
Shares in Next closed up 314p at 4,199p following trading yesterday.