Tuesday 05 January 2016 7:28 am

Next’s share price falls as retailer reports disappointing sales, with warm weather deterring shoppers

High street giant Next's share price fell this morning after it reported disappointing sales in the run up to Christmas, as the warm weather took its toll alongside growing competition online.

The figures

Sales over the 60 days to 24 December nudged up 0.4 per cent across the group, with Next Directory growing two per cent, while sales at Next Retail fell 0.5 per cent.

For the year to 2 January, sales are up 3.7 per cent, with Next Directory again responsible for much of the heavy lifting: sales in this division were up 6.1 per cent, compared with 2.1 per cent in Next Retail.

This is below the full year estimates of between four and six per cent. However, Next said its "good control of margins, cost and stock, along with healthy clearance rate" meant profits would remain within expectations of £810m and £845m.

The central forecast is £817m, a 4.4 per cent increase on last year, though the retailer acknowledged this could increase or decrease by £7m depending on January's trade.

Earnings per share are also expected to rise, up 4.8 per cent, while shareholders will receive an ordinary dividend yield of 2.2 per cent and a special dividend yield of 3.3 per cent. The special dividend will be paid on 1 February to shareholders on the register on 15 January.

Next's share price was down 3.7 per cent on the news.

Why it's interesting

Next has been one of the more dependable fashion retailers of late, often leaving its closest rival Marks & Spencer behind when it comes to sustainable sales and profits. If Next has found the most recent period a struggle, it bodes badly for the rest of the high street.

In fact, Next's surprise results appear to be weighing heavily on M&S, whose share price was down 1.6 per cent in early trading.

Looking ahead to the next full year, Next is characteristically cautious about growth opportunities: it estimates revenues will rise between one and six per cent, and profits in line with those figures.

What Next said

"We believe that the disappointing performance in the fourth quarter was mainly down to the unusually warm weather in November and December [but] while warm weather may have been the main reason for a difficult fourth quarter, we would not want to allow difficult trading conditions to mask any mistakes and challenges faced by the business.

"Specifically, we believe that Next Directory’s disappointing sales were compounded by poor stock availability from October onwards. In addition, the online competitive environment is getting tougher as industry-wide service propositions catch up with the Next Directory."