Next blamed freak balmy weather in November and December for a profit alert that sent the fashion retailer’s shares diving.
Sales at its 500 stores slumped in the run-up to Christmas and Next shares fell 4.5 per cent to 6,880p, an eight-month low, as its chief executive Lord Wolfson admitted that self-inflicted wounds as well as the warm December weather were behind the alert.
The lacklustre trading figures from a brand seen as the retail world’s most reliable performer sent shivers through the sector. Next was the first big retailer to reveal its Christmas trading figures and there are now growing fears that other high street names will have been badly hit. Shares in Burberry, Primark-owner AB Foods and Marks & Spencer also fell in the wake of Next’s update.
Total sales at the company were up 0.4 per cent in the 60 days to 24 December, although in stores there was a drop of 0.5 per cent. Next Directory sales, which include online and catalogue business, rose 2 per cent; they were up 6.2 per cent three months earlier.
The weather caused the biggest problems as it deterred shoppers from buying the jumpers and coats that filled the racks during the autumn season. However, Lord Wolfson admitted that there had also been stock problems at its Next Directory business.
He said: “We ordered too much for the lines in the big main catalogue that runs throughout the season, and not enough stock from the newer brochures, and that went wrong.
“There was a greater emphasis on the brochures and it was completely our fault to be under-stocked.”
Lord Wolfson also warned that profits will be at the lower end of expectations, around £817m, when they are revealed in March.
Profits could have fallen further, but Lord Wolfson remained steadfast in his decision not to offer discounting outside sales periods.
However, sales figures will now be below expectations – they were forecast to be between 4 per cent and 6 per cent, but will now only be 3.7 per cent.
He said: “It never crossed my mind to introduce discounting before Christmas.”
Lord Wolfson added that Next’s next-day delivery service was no longer a game changer in retail, with nearly all rivals copying it. “We were one of the first to offer next-day delivery and everyone else has now caught up,” he said.
Jonathan Pritchard and John Stevenson, retail analysts at the broker Peel Hunt, suggested this could be a result of people moving towards even faster fashion, adding that online competitors will continue to dominate.
They wrote: “Something more fundamental is happening here we think, and the speed of the switch online is greater than most expected… Next’s remarks nod to something much more underlying than any short-term trading form: customer habits are changing fast. Online is winning the arm-wrestle with bricks and mortar, and fashion [and its delivery)] is getting faster.”
Tony Shiret, retail analyst at Haitong securities, said he feared the catalogue had run its course. “This looks to us to represent a material reduction of expectation and a more-cautious view… for the Directory business, where we have long argued that maturity was approaching fast.”