Next lowers sales guidance after first-quarter revenue fall

The fashion behemoth said total full-price sales fell 0.9% during the 12 weeks to the lower end of its sales guidance for the full year of -1.0% to 4.0%.

It said much colder weather in March and April reduced demand for clothing, particularly over the “unusually warm” Easter holiday period.

However, its home and furniture full-price sales, which are less dependent on the weather, increased by 7%.

Next Directory sales, which suffered towards the back end of last year, increased 4.2% in the period “as a result of better stock availability”.

The retailer said: “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.”

Earlier this year, Next boss Lord Wolfson warned of “an economic slowdown” driven by shifts in consumer behaviour, despite posting a 5% uplift in full-year profits.

Wolfson said that he expected the coming year to be the “toughest” since 2008, adding: “It may well feel like walking up the down escalator, with a great deal of effort required to stand still.”

He told Retail Week that while he was being “careful not to call it a recession”, he believed the combined effect of the slowdown with consumers choosing to spend money on experiences such as restaurants or cinema visits, rather than products, signalled a challenging year for the retailer.

“All evidence shows that we are going into a slowdown,” he added.

Begbies Traynor analyst Julie Palmer said: “Previously an example of stability in an otherwise rocky UK retail sector, Next has without doubt hit a rough patch, announcing its third cautionary statement in a row.

“It seems that sales during the first quarter have yet again come in below expectations as the early onset of Easter combined with highly irregular weather exacerbated the retailer’s problems.

“Worryingly, the upcoming EU referendum could further dampen the retailer’s spirits as both consumers and investors alike take a more cautious approach to their finances ahead of the Brexit vote.

“On the upside, the apparel retailer has at least set out a clear strategy, which it hopes will deliver long-term sustainable growth by improving its product, marketing, servicing and costs.”