Next shows that even the strongest are struggling

Click to follow
The Independent Online

Fashion giant Next is set to become the latest retailer to send shivers through the City when it unveils a sharp slide in sales later this week.

Fashion giant Next is set to become the latest retailer to send shivers through the City when it unveils a sharp slide in sales later this week.

Analysts are expecting the company to confirm that current trading is down by between 4 and 5 per cent when it updates investors at its annual general meeting on Wednesday. Nick Bubb, at broker Evolution Securities, warned: "It's going to be worse than when Next reported at Easter," adding that the retailer was likely to blame the slowdown in consumer spending and cold weather for the slump. He is predicting that underlying sales will be down by around 5 per cent.

Another analyst, Richard Ratner at Seymour Pierce, is expecting like-for-like sales to be off by around 4 per cent.

Next is one of the strongest retail stocks on the market, so any bad news will add to the already depressed sentiment surrounding the sector. Following a tough Christmas, the market has already endured profit warnings from the likes of Boots, B&Q-owner Kingfisher and discount fashion chain Matalan.

Few are expecting conditions to ease over the coming months, and a number of analysts are fearful that conditions will, in fact, deteriorate further. The British Retail Consortium is calling for an urgent interest rate cut to boost spending.

The update will compound a poor run for Next so far this year. In its most recent results, full-year pre-tax profits rose 18.1 per cent to £422.9m, meeting analyst expectations. But at the results presentation just before Easter, chief executive Simon Wolfson warned of tough times on the high street as he unveiled a 3.5 per cent slide in current trading.

Mr Wolfson insisted, however, that Next would use its weighty purchasing power to maintain profit margins rather than cut prices. This was taken as a signal that Next did not want to engage in a price war with Marks & Spencer, which is slashing prices in a bid to loosen Next's grip on the market.

M&S's fortunes have long been linked with Next's. The fashion chain's surging success over recent years has hit its rival hard, particularly in the crucial womenswear arena.

However, M&S is also understood to be suffering from the gloomy sentiment on the high street.

Despite the difficult conditions Next has said it will open a further 50 stores this year.

Comments