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Next continues to battle 'miserable' sales conditions

By Vivian Hendriksz

2 Nov 2016

Business |ANALYSIS

London - Earlier this year, high street fashion retailer Next predicted a challenging year ahead and a difficult third quarter - and so far its results have proven this statement to be true.

For its third quarter to October 31, total sales dropped 3.5 per cent and retail sales declined 5.9 per cent. Full price sales for the year were also down 1.5 per cent compared to the same period last year, as sales in August were "subdued following the much larger end-of-season sale in July," said the retailer in a statement.

"These latest figures from Next confirm that underlying conditions on the high street remain desperate for clothing and footwear retailers," said Richard Lim, Chief Executive, Retail Economics. "The beginning of the autumn/winter season was plagued by unseasonably warm weather which has decimated sales growth across the sector."

"Overlaying these short-term influences has been a structural shift in shopper spending habits which are gravitating towards the experience-economy. Many of us are choosing to spend our cash on eating out and other recreational pursuits instead of refreshing our wardrobes."

"On the other hand, retailers are facing rising costs resulting from the collapse in sterling, higher wages through the implementation of the National Living Wage and rising rates which will all bear down on profitability," he added. "The outlook looks very challenging indeed."

Next attributed its weak performance in its third quarter to heavy discounting and high comparisons to its performance last year.

Next has further slimmed down its sales guidance for the full fiscal year to between - 1.75 per cent and 1. 25 percent, down from its previous guidance of -0.25 per cent to 2.5 per cent. "The mid-point of our new sales range is marginally lower than previous guidance," added Next.

"However, cost savings have also been better than expected, so our central profit forecast remains unchanged at 805 million pounds."

Photo: Next, Facebook

Retail Economics
third quarter