Next issues profit warning as cold weather bites
Next, the Enderby-based clothes and homewares retailer, has issued a profit warning this morning (4th May), blaming cold weather over Easter for a drop in sales.
Group sales declined by 0.9% from 31 January to Monday 2 May, with Next’s high street stores faring worst after seeing a plunge of 4.7%.
Next said that much colder weather in March and April reduced demand for clothing, particularly over the Easter holiday period, which was unusually warm last year.
In the same period Next’s Home and furniture full price sales, which are much less weather dependant, were up 7%.
Next now says its profits could fall this year by as much as 8.9% or grow as little as 3.7%.
A statement read: “We believe it is unlikely (but possible) that sales will deteriorate further, and we have seen a significant improvement over the last few days as temperatures have risen.
“However, the poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and a potentially wider slow-down in consumer spending.
“Given this uncertainty, we think it is prudent to widen and lower our full price sales guidance range to -3.5% to +3.5%. The lower end of this range is based on sales for the rest of the year continuing to run at the rate of the last six weeks.”
Richard Lim, chief executive, Retail Economics said: “NEXT’s latest financials are a stark reminder that consumer confidence in the UK remains fragile.
“Concerns around Brexit, a slowing labour market and lacklustre wage growth are weighing on the minds of consumers. Shoppers have cut back on discretionary spending and clothing retailers are feeling the brunt. The ONS has reported even poorer conditions over the same period suggesting sales in the clothing sector fell by 3.9%, the worst in over 10 years.
“With BHS and Austin Reed recently falling into administration we’re fearful that the other clothing retailers, in financially precarious positions, may follow.”