Next battles tough third quarter with retail sales down nearly six per cent

 
Rebecca Smith
Christmas Shoppers Hunt For Gifts On The High Street
Source: Getty

What a difference a few months make.

In August, shares in Next spiked at the open as it said Brexit hadn't affected consumer spending. For its third quarter, though, total sales were down 3.5 per cent and retail sales were down 5.9 per cent.

On the bright side, sales were up in October, while the retailer's sales for the year (including markdown sales) so far were up 0.4 per cent and its full year profit forecast was unchanged. Phew.

The figures

Next said full-price sales were subdued in August after the bumper end-of-season July, while in September it said it was trading against its best month last year. Excuses, excuses.

Retail sales for the quarter to 31 October were down 5.9 per cent and total sales fell 3.5 per cent, while full price sales for the year to date were down 1.5 per cent on last year.

October sales "improved significantly as comparative weeks last year became less challenging". Bring on the Christmas shoppers.

Next's sales growth by month
Next's sales growth by month (Source: Next)

Full-year sales guidance has been narrowed to somewhere between -1.75 per cent and 1.25 per cent, from the previous range of -0.25 per cent to 2.5 per cent.

As cost savings have been better than expected this year, Next's central profit forecast remains unchanged at £805m.

Shares were up 0.8 per cent at 4,848p in early trading.

Next share price

Why it's interesting

The retailer has made no secret of the fact this was going to be a difficult year, so watching it navigate the bumps in the road will be key.

Next Directory, its online and catalogue business, had been powering the retailer's growth over the past five years (rising 75 per cent in that time), but that's been slowing down and in the third quarter its directory sales were flat, though up 3.2 per cent on the year to date.

Paul Thomas, senior consultant at Retail Remedy, said: "Next, like the rest of fashion retailers, is suffering from unseasonably warm weather which only now seems to be turning."

He added that:

Next can go in waves, quality sometimes really strong and offering great design and materials, and great value, and then inexplicably the value drops and the quality appears to be sacrificed. We hope this is not the sign of things to come with rising import costs.

What the company said

Next said heavy discounting and tough comparisons to its performance last year were to blame for the sharp drop in sales for this quarter.

Chief executive Lord Wolfson has said this year will be challenging. In March, he said it could be the toughest since 2008 and will feel like "walking up the down escalator".

In short

A bruising third quarter, but the retailer has dusted itself off and has stuck with its profit guidance.

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