Next shocks as it cuts forecast

Shares plummet 4pc as new ranges disappoint

NEXT chief executive Lord Wolfson has trimmed annual sales forecasts after disappointment over the performance of his current ranges.

Cautious comments from the Tory peer wiped 4pc off the retailer’s shares and overshadowed what was a bumper set of annual figures where profits for 2014 leapt 12.5pc.

Britain’s second- largest clothing retailer, which has been a stock market star – shares rising 11.6pc in the past 12 months – credited the strong performance on accelerated store openings and success in breaking into new markets.

But it was the lacklustre outlook for the present year that saw the shares fall 305p to 7315p yesterday.

Wolfson flagged the lower sales forecast because of the contrast with last year’s strong performance where the ranges across all five Next divisions had hit the mark. ‘More ranges are currently doing well than badly,’ he said. ‘Although we are happy with most of our current product ranges, we recognise that some collections are not as strong as they were at this point last year.’

Next adjusted sales growth down to 1.5pc to 5.5pc in the year to the end of January 2016, compared with previous guidance of between 2.5pc and 7.5pc.

Tony Shiret, an analyst at stockbroker Espirito Santo, reiterated his sell recommendation, saying: ‘Overall Next is highly rated and this is the second disappointment in the past six months.

‘We continue to point to a structural slowdown… we remain sellers.’

Despite the sales warnings the retailer posted a pre-tax profit of £794.8m for the year to January 2015, up from £695.2m on sales of £3.9bn.

The engine of growth was its Directory business, which includes catalogue and online and where sales rose 12.1pc to £1.5bn. The retail stores were up 4.8pc to £2.3bn. The dividend was raised by 16.3pc to 150p-a-share.

Wolfson said: ‘Over the course of the year we have focused on improving the design content of our ranges. The focus on design continues in the year ahead with further investment in our fabric.’

On the outlook for this year he said: ‘Although the consumer economy looks benign, we remain very cautious.’ Trad- ing in China has begun to gain traction but the firm has pointed to international sales growth rates slowing to 25pc in 2016 versus 60pc in 2015.

Some of this is because of the turmoil in Russia and Ukraine.

Trading space increased by 330,000 square feet to 7.4m square feet. The number of stores (500) remained broadly the same, with the increase from new stores being offset by the closure of smaller, less-profitable branches.

The firm is also emulating Zara-owner Inditex by cutting down the time it takes to design products and get them on the shelf.

Wolfson explained that Next has traditionally developed its product designs eight months before the launch of a fashion season.

But it has also produced a small amount of lines closer to the season to make them as current as possible.

‘This approach to buying is newer and less comfortable for Next, and requires a different mindset to our traditional techniques,’ he said. ‘We aim to build on the success we have had with shorter lead-time products.’

Although unwilling to be drawn on the May General Election, Wolfson did say the political situation was causing uncertainty. ‘The reason we refer to political uncertainty is really that the environment in the autumn or winter will depend on who gets into the government and what they do in their first budget – and that’s the uncertainty,’ he said.

‘I don’t think consumers think “there is an election coming up, I don’t think I will buy a dress”.’