Business

Next shares dive 15% on gloomy outlook

Next store Image copyright PA

Retailer Next has seen its shares fall 15% after it forecast that 2016 would be a "challenging year" for its business, "with much uncertainty in the global economy".

The prediction came as the High Street chain unveiled its annual results for the year to 30 January, showing a modest rise in profits.

Pre-tax profit was £836.1m, up from £782.2m a year earlier.

Next said the year ahead "may well be the toughest we have faced since 2008".

The firm's shares suffered their biggest one-day fall since December 2008, shedding £10.05 to £56.55.

Next, which has more than 500 stores, also downgraded its sales forecast for the 2016-17 financial year.

Previously it had expected growth of between 1% and 6%, but it said it now expected it to fall within a range of minus 1% to plus 4%.

Next said it believed there might be a "cyclical move away from spending on clothing, back into areas that suffered the most during the credit crunch".

It added that according to the latest figures available for consumer spending, "it can clearly be seen that growth in experience-related expenditure, such as eating out, travel and recreation, was much stronger" than in the clothing sector.

Image copyright Next

Wrong escalator

The retailer said its Next Directory online division had seen slowing growth.

"Partly this is as a result of competitors catching up with our delivery and warehousing capabilities; partly as a result of changes in the ways customers are shopping online," the firm's statement added.

It said its priorities included upgrading the online business while developing and expanding its UK retail store network.

"In many ways, we have more to do than ever before with complex challenges to our working practices across product, marketing and systems," Next said.

"It may well feel like walking up the down escalator, with a great deal of effort required to stand still.

"It will not be the first time we have felt this way, and our experience is that the effort put into improving the business in tough times can pay handsome rewards when conditions improve."

Next said it expected international online sales to grow by 25% in the coming year, to about £205m.

It said this rate of growth was "significantly lower" than last year, because it had now opened in all its target territories, including China.

"In addition, two of our largest markets, Russia and Ukraine, have both suffered significant currency devaluations," the firm said.

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