Retailer Next see sales drop on the high street.
Retailer keeps guidance unchanged as online rises
Next has become the latest retailer to report a deterioration on the high street as store sales tumbled over the past three months.
The fashion and homewares chain said high street retail sales fell 8 per cent, while online sales rose by 12.7 per cent.
The group reported a 1.3 per cent rise in full-price sales – up 2 per cent including interest income from nextpay customers – in the three months to October 27.
The result marks a slowdown on the 4.5 per cent rise in fullprice sales seen in its first half.
Next kept its fullyear guidance unchanged, with the group pencilling in annual sales growth of 3 per cent and a 0.1 per cent rise in group pre-tax profit to £727m.
The group increased its full-year profit guidance in September after a better than expected first half, posting interim pre-tax profits up 0.5 per cent at £311.1m.
But last month’s earnings cheer came as it also warned over the threat of gridlock at ports and price hikes from increased tariffs if the UK crashes out of the European Union with no deal.
In the document outlining the group’s Brexit no deal contingency plans, Next also cautioned that another sharp fall in the value of the pound and increased tariffs also posed a threat.
Next said in the “unlikely event” that free-trade agreements were not put in place, it could send the cost of imported goods soaring by up to around £20m, which could push up prices by around 0.4 per cent.
The update comes after the latest figures from the Confederation of British Industry (CBI) showed retail sales growth slowed more than expected in October as consumers reined in their spending.
This followed a summer shopping spree driven by warm weather and the World Cup football tournament.
Tom Stevenson, investment director at Fidelity Personal Investing’s share dealing service, said: “Next continues to be a beacon of light in a bleak retail sector.
“But third quarter full-price sales growth of 2 per cent, bang in line with expectations, was only possible thanks to ongoing strong growth in the retailer’s online and catalogue business and growth in credit income.
“Sales on the high street are declining as fast as everyone else’s as consumers sit on their hands and digital disruption continues to devastate the sector.
“Three months ago, chief executive Lord Wolfson (inset) highlighted the threat of Brexit. With the summer’s World Cup and weather boost now fading in the memory, the next few months will be a significant challenge for the retail sector, but no business is better placed to navigate the storm than Next.” Analyst Greg Lawless at Shore Capital said: “Retail bellwether Next has issued a solid third quarter trading statement for the three months to October 27.
“As ever it was a tale of two halves. Retail sales fell 8.0 per cent in the period, against a run-rate of -6.9 per cent in the first half.
“We would highlight the tougher comparatives that the retailer is cycling, together with the well documented unseasonal warm weather across the UK in early autumn, that has provided challenges for all clothing retailers.”
He said Next had produced a good trading update despite the challenges of footfall to its retail estate.
“The online gains continue to outweigh the drag from lower retail sales,” he added.
“The company remains well managed with tight cost and stock control.”
Next will be one of the first retailers to report on progress over Christmas 2018 and it is scheduled to update on January 3 next year.
Mr Lawless said: “With just 54 shopping days to go until Christmas 2018, it remains all to play for as we progress into November.
“For now, we reiterate our ‘hold’ rating on Next.”
Next continues tobea beacon of light in a bleak retail sector.
FASHION STATEMENT:Analysts said Next had produced a good trading update despite the challenges of footfall to its retail estate.