Next expects customers to rein in spending

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The Independent Online

The fashion chain Next warned today of increasing sales pressure this year as struggling shoppers tighten their belts.

The high street giant is bracing itself for the impact of soaring fuel and household bills and more expensive mortgages on its customers.

Next said its main customers - aged between 25 and 45 - were likely to be hit heaviest by higher costs and debt burdens.

It predicted like-for-like sales declines of between 4 per cent and 7 per cent across its high street stores in the first half of this year - worsening from the 3.2 per cent decline seen in the 12 months to January.

Next said: "We can see no reason why there should be any recovery in consumer spending during the year ahead."

Next finance director David Keens said: "Looking ahead we still see a very

difficult consumer environment, there is no getting away from that."

The FTSE 100 Index-listed company also maintained "very conservative" sales expectations and will continue its clampdown on costs as it faces up to a challenging year.

The company has also been hit by heavier competition among retailers as shoppers have to pay more for essentials such as petrol and food.

It added: "Next has always positioned itself at the aspirational end of the mass market. Long term this is the part of the market likely to grow fastest as economic growth enables more people to become affluent.

"In a downturn it is also likely to be the part of the market that suffers most."

Next expects more modest like-for-like sales growth at its Directory catalogue and online business - a key driver of profits - of between 0 per cent and 2 per cent in the first half of this year.

The gloomy forecast for 2008 came despite a 4 per cent rise in pre-tax profits to £498 million for the year to January, in line with the firm's previous guidance.

Next spent last year revitalising its stores and ranges in an attempt to "put the magic back" into the brand which has struggled in recent years.

It spent £122 million on its stores in 2007, and by the end of this year almost three-quarters of its 502 outlets will be new, refitted or redecorated.

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