Retailer Next cuts profit guidance as sales feel the heat

Clothing retailer Next cut its profit guidance on Wednesday after unusually warm weather suppressed demand for its winter wear, sending an ominous sign to rivals ahead of the crucial Christmas season.

Next, which trades from over 500 stores in Britain and Ireland, about 200 stores overseas, and through its Directory internet and catalogue business, said profit for the full-year was expected to be within a range of £750 million to £790 million.

That would represent year-on-year growth of between 8 and 14 per cent but is lower than previous guidance of£775 milion to £815 million.

The comments had extra resonance coming from Next which has outperformed rivals for a decade due to a strong online offer, new store openings and diversification into new product areas, such as homewares, as well as new overseas markets.

The firm was forced to make the cut after sales for the 13 weeks to October 25th, its fiscal third quarter, grew by 5.4 per cent, below its previous forecast of 10 per cent, as shoppers held off buying coats and jumpers.

The company said it did not intend to pay any further special dividends this year but could still make share buybacks.

Next had warned on September 30th that profit forecasts could be reduced if the warm weather persisted, rattling its shares as well as rivals’ across the sector.

Recent data showed UK retail sales fell more than expected last month, with clothing demand hindered by the driest September since records began in 1910, according to the Met Office. A cold snap has also failed to materialise in October.

Next said that the volatility of current trading and a very strong performance last year meant it had also cut sales expectations for the fourth quarter, forecasting growth of 1 per cent versus previous expectations of 4 per cent.

Reuters