Shares fell 11% as retailer announced 3.5% drop in retail sales over Christmas period
Companies: Next plc
Leading high street retailer Next Plc has warned that 2017 could prove to be a "challenging" year for its retail business as it reported a significant 3.5% drop in sales in the Christmas period.
In the two months prior to 24 December, Next's sales fell 0.4% on the previous year, with a hefty 3.5% decline for Next Retail offset by Next Directory's 5% increase.
Management said it had been disappointing considering 2015 had also proved to be poor:
"We were expecting sales in the fourth quarter to grow on the previous year, as the comparative numbers in 2015 were poor."
Year to date, Next Retail has seen sales fall 4.3%, leading to a total sales decline of 1.1% for the Group.
The company also warned that 2017 looked to be just as challenging, as rising inflation erodes earnings growth, and the devaluation of the pound hits prices:
"As previously indicated, following the devaluation of the Pound, we expect prices on like-for-like garments to rise, but by no more than 5%. We expect that this will depress sales revenue by around 0.5%."
The firm is now forecasting full-year profits to be around £790m, near the lower end of its previous guidance of £785m-£825m.
Today's announcement is in marked contrast to online clothing retailer boohoo.com's surprise trading update on 14 December, which saw the group upgrade its forecasts to 38-42% revenue growth for the full-year.
Independent equity research firm AlphaValue said today's announcement showed the backdrop was getting tougher for British retailers:
"Total ytd group sales were up 0.4%, underpinned by an 18% surge in full-price overseas sales. The full-year guidance was lowered to -1% growth for full-price sales and to £792m for pre-tax profit (£805m previously).
The disappointing market momentum by early Q4 has led to the downgrade of FY2017 guidance (-4.5%/+1.5% full-price sales growth at CER). The slump in clothing demand is likely to continue in the year ahead and the context is becoming more challenging."
Shares in Next Plc fell c.11% in early trading on Wednesday.