Business

Next sees sales fall again in 'difficult' quarter

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Retailer Next has blamed heavy discounting and tough comparisons to its performance last year for a sharp drop in sales in the third quarter.

Sales at its High Street stores fell 5.9% in the three months to the end of October, while sales at its Next Directory online division were flat.

It now expects full year sales to be "marginally lower" than it said in May.

It is the fourth time this year that Next has downgraded its annual sales guidance.

The chain forecast full-year sales would be in a range between 1.75% lower and 1.25% higher than the previous year.

However, it said that cost savings meant its central profit forecast for the full year remained unchanged at £805m.

The chain, which has more than 500 stores, warned in September that the third quarter would be "difficult".

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Media captionNext boss Lord Wolfson said in October inflation would prove "a challenge"

At the time, chief executive Lord Wolfson blamed "economic and cyclical factors working against us" and said the unusually warm September had meant no one was buying winter clothes.

In the year so far, Next said, sale items had outsold full-price items, helping total sales to increase slightly. However, it said the number of items sold at full price was down 1.5%.

Next, once one of the strongest performers on the High Street, has seen its shares fall by more than a third this year.

By the close, shares had risen 3.5%. Analysts credited the rise to the fact that the chain maintained its profit forecast.

Paul Thomas, senior consultant at Retail Remedy, said the brand was at risk of becoming "too settled" and that it had failed to keep up with younger customers.

"It's too generic. If it's not careful it will go the same way as M&S. Young people wouldn't want to shop there in case they rock up at a party wearing the same outfit as their gran. It needs to attract people under 25," he added.

'Desperate conditions'

Official statistics, published last month, showed weak sales of food, footwear and clothing in September, with the amount of goods people bought flat compared with August.

Richard Lim, chief executive of research firm Retail Economics, said the figures from Next confirmed "underlying conditions on the High Street remain desperate for clothing and footwear retailers".

"The beginning of the autumn/winter season was plagued by unseasonably warm weather, which has decimated sales growth across the sector.

"Retailers are facing rising costs resulting from the collapse in sterling, higher wages through the implementation of the National Living Wage and rising rates which will all bear down on profitability. The outlook looks very challenging indeed," he added.

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