Next’s Christmas sales nightmare
Shares sink as it warns seasonal takings may be hit hard
NEXt has warned of a sales collapse in the runup to Christmas, sparking fresh fears for the high Street and sinking the shares of retailers.
the clothing firm said sales were likely to fall over the crucial Christmas period after the unseasonably warm autumn hit demand for its winter stock in October.
and it warned that trading had been ‘extremely volatile’.
Its dire alert sent its shares tumbling 9.1pc, or 45p, to 4471p, and also wiped millions off Marks & Spencer, Debenhams and Primark owner associated British Foods.
analysts said the update had spooked the City, casting a cloud over the Christmas period which many retailers had been banking on for extra business.
Like most, Next makes a large chunk of its sales over the Christmas period but demand for its autumn/winter ranges are highly dependent on weather.
Lord Wolfson, chief executive, said customers were buying only ‘as and when they need’.
his sentiments echo warnings issued by John Lewis and Debenhams last month, and comes after a survey published by the Confederation of British Industry showed retail sales in October plummeted at the fastest pace since early 2009.
as well as Next’s own share plunge, M&S fell 4.5pc, Debenhams 4pc and Primark 2.1pc.
Next now expects sales to dip 0.3pc in the last three months of the year, despite a 1.3pc jump in sales in the third quarter. that was better than the second quarter, when sales grew 0.7pc.
George Salmon, equity analyst at hargreaves Lansdown, said: ‘these results would not have gone unnoticed by others across the market. Shareholders in Marks & Spencer, for example, might now be a bit more nervous ahead of next week’s halfyear numbers.’
In its third- quarter trading statement yesterday, Next revealed a 13.2pc surge in directory custom – catalogue and online sales. In shops, sales slipped 7.7pc – more than twice as fast as expected, and over the first nine months of the financial year were down by 0.3pc.
Next kept its profit forecast for the full year at £717m – down from £790m in 2016-17, but narrowed its sales forecast to a range of between £692m and £742m. It had previously predicted full-year sales would fall between £687m and £747m.
the company is Britain’s most successful clothing retailer in terms of profits, but has faltered over the past two years as customers prioritise their holidays and entertainment.
In april, it reported its first fall in annual profits since 2009 and forecast a tough year. Shares, however, had climbed on hopes it had turned a corner.
Russ Mould, investment director at aJ Bell, said: ‘two things could make a big difference to Next’s fortunes. the first is a cold snap. that would help the company shift its stock of winter warmers without having to discount its way out of trouble.
‘the second is a rising pound – that would lower its import costs and also dampen wider inflation, to the potential benefit of consumer spending.
‘history suggests that the stock has tended to do best when the pound is rising and worst when the pound is falling, so this makes [today’s] Bank of England interest rate decision particularly interesting, as aggressive talk from Governor Carney could give sterling a lift.’