Next issues profit warning amid “challenging” conditions

Leicester-based retail giant has posted a drop of 3% in sales for its first quarter to 29 April, amid what it is calling a “challenging” trading environment.

The firm has also issued a profit warning, reducing its upper end sales growth for the year to just 0.5% and that it now expects profits to be £740m at best – down £40m from last year.

In a statement, Next said: “The UK consumer environment remains challenging, particularly in the clothing and homeware markets, and real wage growth is now close to zero.

“In our full year results announcement in March we talked about omissions in some of our product ranges. We said that we expected some improvements from May onwards, but that our ranges would not be where we wanted them to be until the Autumn season in September. We still believe this to be the case.”

Richard Lim, chief executive, Retail Economics said: “Troubles at Next show no sign of abating judging by these latest figures. Continued underperformance against the market suggests the problems are more company-specific than we’d first thought.

“The growth of the experience economy, the relentless shift towards online shopping and the emergence of nimbler pure online retailers has changed the competitive landscape for the clothing sector. What’s more, consumers have embraced the casual sportswear market in recent years which has diverted even more spending away from the retailer.

“Conditions are only likely to weaken further in the coming months as inflation surges towards our forecast of 3.3% which will erode households’ spending power. Indeed, we expect earnings growth to start shrinking imminently and it is likely to stay in negative territory for the rest of the year.”

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