London, UK (BBN)-Next has warned that this year will be “challenging” as it reported a fall in sales in the run-up to Christmas.
The retailer said full-price sales fell by 0.4 per cent in the 54 days to 24 December, with annual profits now set to be at the low end of expectations, reports BBC.
The firm forecast full-year profits would be £792m, compared with previous guidance of £785m-£825m.
Next said sales in 2017 could be hit as rising inflation erodes earnings growth and squeezes consumer spending.
Next shares fell by 12 per cent at the start of trading in London.
“The year ahead looks set to be another challenging year; therefore we are preparing the company for tougher times,” the company said.
It said the price of clothing could rise “by no more than 5 per cent” following the fall in the value of the pound last year.
It added that this would “depress sales revenue by around 0.5 per cent”.
As a result, it said it was budgeting for full-price sales growth in the year to January 2018 within the range of a fall of 4.5 per cent and a rise of 1.5 per cent.
If it came in at the mid-point of a fall of 1.5 per cent, that would be “marginally worse” than the current year’s performance, it added.
Next is already predicting a fall in profits for next year, saying it expects to make between £680m and £780m.
However, the retailer said it was “well placed to weather a downturn in consumer demand”.
‘GAMBLE’
The figures for the 54 days to Christmas Eve revealed sales in stores fell by 3.5 per cent, while Next Directory sales rose by 5.1 per cent.
In its statement, the company said despite a “difficult season” it went into its end of season sale with 3 per cent less stock than last year, but it sold 7 per cent fewer products than 12 months ago.
“Next took a gamble on keeping their sales full price in the run-up to Christmas, it’s what they usually do, and they usually use the sales to try and get people into the shops afterwards,” said Kirsty McGregor of Drapers magazine.
However, she said, that strategy did not seem to have paid off this year.
“I think what we’re seeing there… is an underlying move away from spending so much money on clothing and footwear. People seem to be spending more money on going out and on technology, things like that.”
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