Re­tailer Next see sales drop on the high street.

Re­tailer keeps guid­ance un­changed as on­line rises

Yorkshire Post - Business - - FRONT PAGE - Ros Snow­don CITY EDITOR @RosSnow­donYPN

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.

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