Next fails to convince the market to blame the weather for poor Christmas sales

Next has kicked off the year with a disappointing Christmas sales report and a very little excuse: the weather didn´t accompany so shoppers weren´t inspired to buy the seasonal clothing ranges.

The British retailer reported Tuesday revenue that missed analysts’ estimates, and, consequently, that profit will come in at the bottom of its forecast range.

“This quarter was unusual in that we didn’t have any cold weeks. There’s not a lot you can do. When it’s warm in winter people don’t buy T-shirts and shorts,” said chief executive Lord Wolfson.

Next falls short of market estimates for Christmas sales

Full-priced sales gained 0.4 percent in the two months to Christmas Eve, said in a statement the UK’s second-largest retailer. In contrast, analysts expected growth of 5.8 percent, according to the median of 17 estimates gathered by Reuters.

“The disappointing performance in the fourth quarter was mainly down to the unusually warm weather in November and December,” the company said. “In addition, the online competitive environment is getting tougher.” In this vein, Next said it expects pretax profit will be about 817 million pounds for the financial year ending this month, compared to its forecast range of 810 - 845 million pounds.

Analysts at Jefferies cut their fourth-quarter sales growth for the group to 4 percent compared to a year ago from earlier estimates of 7.6 percent.

Jefferies said: “Next typically fares better in this regard and has navigated the seemingly constant bouts of highly unseasonal weather over the past five years better than most.”

It is worth of recalling that back in October, the group edged up its full-year guidance to between 810 million pounds and 845 million pounds.

On a positive note, Next said it expects profits to be in line with previous expectations – partly thanks to ‘good control of margins, costs and stock’. That somewhat validates its decision to shun the Black Friday discount frenzy that other retailers got sucked into, highlights ‘Management Today’.

“Next has proved once again that holding its nerve delivers results,” said James McGregor, partner at consultants Retail Remedy.” Lord Wolfson is known to underplay performance, and warns of future challenges, but Next consistently deliver, remain unflustered, and stay true to its core customer,” concludes McGregor.