(qlmbusinessnews.com via telegraph.co.uk – – Wed, 4 Jan, 2017) London, Uk – –
Next shares fell more than 10pc in early trading after it warned that its profits would be at the lower end of its guidance after “difficult” Christmas trading.
The high street retailer added that it expected 2017 to be another challenging year due to a squeeze on consumer spending and the fall in the value of the pound, which will hit its costs.
Next shares immediately tumbled to £42.31 following the gloomy update, in which it reported a further decline in sales in the fourth quarter of 2016. It said a difficult trading session meant its end-of-season sale was down 7pc on the same period in 2015.
The FTSE 100 company had previously said its profit before tax for the year to January would be between £785m and £825m, but this morning revealed a revised central guidance of £792m.
Total sales in the year to December 24, including markdown sales, were up 0.4pc on the previous year. But full-price sales fell 1.1pc on last year.
The group had enjoyed better-than-expected sales in the summer but now anticipates the “cyclical slow-down in spending on clothing and footwear” to continue into 2017.
The prices for garments it sources are set to increase following the devaluation of the pound, Next said, adding: “We may see a further squeeze in general spending as inflation begins to erode real earnings growth.”
Sales for the year to December 24 were down 4.3pc in Next retail but directory sales were up 3.6pc.
“Next is well placed to weather a downturn in consumer demand,” it said. “Our balance sheet remains robust and our net debt is forecast to close the current year at around £850m, this is more than covered by the value of our Directory debtor book, which will be approximately £1bn at the end of January 2017.”
Analysts at Jefferies said: “Next's disappointing Christmas trading leads to an even more downbeat outlook for 2017/18.
“Offering negative earnings growth and a lower special dividend, it is difficult to see any near-term upside here.”
By Sam Dean
