Next profit drops for first time in eight years as retail sales slide

 
Helen Cahill
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It has not been a good year for Next

Retail sales slumped at Next last year, leading to its first drop in profits for eight years.

The high street chain also said its profits will drop again in the year ahead, giving a guidance of between £680m (a 14 per cent drop) and £780m (a two per cent drop).

The figures

Total sales at Next retail dropped by 2.9 per cent, leaving total group sales flat at £4.1bn for the year ending January 2017.

Profit before tax came in at £790.2m, a fall of 5.5 per cent from £836m the year prior. After tax, profit was down from £666.8m to £635.3m, a drop of 4.7 per cent.

Why it's interesting

It has not been an easy year for middle-market retailer Next. Christmas sales were disappointing, forcing the company to cut its profit forecast for 2017-18. The company pointed out today that its profits last fell in 2008, but that it had managed to recover.

And this year, it is unlikely that things will get any easier. All retailers are facing sizeable cost increases. The national minimum wage is increasing at the beginning of next month, and as individual retailer's hedging policies run out, they will be hit with the full cost of sterling's devaluation.

Next today identified three potential threats faced by the clothing industry in 2017:

  • UK consumer spending shift from fashion
  • Rising prices from inflation
  • Weaker wage growth

What Next said

John Barton, Next's chairman, will retire from the company on 1 August. Today, he said in a statement: "Trading conditions in the year ahead will continue to be tough, however I believe that by focusing on our core strengths, as we did during 2008, we will see Next emerge from this period stronger than before."

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