Retailer Next has slashed its sales guidance for the second time in the space of two months after it undershot analyst forecasts in the three months to the start of May and warned of “a potentially wider slow-down in consumer spending”.
The UK fashion retailer’s total full price sales from the Next brand fell 0.9 per cent, compared with analyst estimates of no change.
The Next retail division suffered a 4.7 per cent drop in full price sales, even worse than the 1.6 per cent drop forecast by analysts.
The company has cut its sales guidance range for the full year to January 2017 to between a contraction of 3.5 per cent and a rise of 3.5 per cent, down from a 1 per cent contraction and 4 per cent growth in March. This was down from previous guidance issued in January of between 1 per cent and 6 per cent growth.
Next, whose shares have dived 30 per cent so far this year, said it expects to make pre-tax profit of between £748m and £852m in the full year.
The company cautioned:
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
Once again, it cited the weather as a factor in its underperformance, claiming: “Much colder weather in March and April reduced demand for clothing, particularly over the Easter holiday period, which was unusually warm last year. “
This comes after it partially blamed weak trading over the Christmas period on unseasonably warm weather.
This downbeat trading update adds to what has already been a tough year so far for Next. In March the company’s shares plunged more than 15 per cent in one day, its worst decline since 1998 after it slashed its sales guidance and warned that it is bracing “for what could be a difficult year” in 2016.
At the time it highlighted concerns that shoppers may alter their habits, choosing to focus spending on leisure activities such as holidays instead of clothes. In March chief executive Lord Wolfson warned that trading this year will probably feel like “walking up the down escalator, with a great deal of effort required to stand still”.
There’s been an almost relentless drumbeat of worrying news from the UK retail sector over the last six months.
Last month Moody’s added to the grim tone with a warning that things will remain tough for the sector for the next 12 months, with profit growth slowing and maybe even going into reverse.