Warm weather helps to boost beleaguered Next

The clothing retailer Next saw sales fall sharply through the first months of this year but said that the improving weather had begun attracting people back to the high street, providing the first chinks of light amid the gloom afflicting the UK high street.

In the last 11 days, as the weather has warmed, the company said that sales had "picked up markedly" and reiterated its confidence that it will be able to hit the City's full-year profit expectations. In a sign of the desperation for any early indications of a recovery from the effects wrought by the credit crunch and price inflation on retailers, the news was enough to send company's shares up by 5.9 per cent, despite a like-for-like sales drop for the three months through the end of April of 8.9 per cent. Combined sales from its high-street shops and its Next Directory catalogue business fell by 3.9 per cent, in line with the predictions given by the company in March that sales would fall between 4 and 7 per cent.

The sun may have coaxed shoppers out of the house, but Simon Wolfson, Next's chief executive, was nonetheless pessimistic about the prospects for a quick recovery. He said: "What we can say with some certainty is that it is fairly unlikely to get better this year." He cited the sharp increase in mortgage rates, fuel and food, in that order, as the main reasons why people would continue to be wary of spending on discretionary items such as the chain's higher-end fashion.

Next's warning follows profits warnings from several other retailers this year, including DSG International, Moss Bros; and Land of Leather due to what economists have described as a "forced redistribution of spending". The cost of petrol at the forecourt has skyrocketed due to the record price of oil, while basics such as the cost of a loaf of bread have been pushed up by the higher cost of the commodities used to produce them.

Nick Bubb, retail analyst at Pali International, said: "The fall in business is about more than just the weather: the credit crunch is biting at consumer spending, the middle-market is getting badly squeezed and the Next customer is right in the firing line of higher fuel, food and mortgage costs."

Despite fears of a rapid slowdown of the economy the Bank of England provided no respite yesterday, choosing to keep interest rates steady at 5 per cent on concerns that another cut could encourage further inflation. Stephen Robertson, director general of the British Retail Consortium, said: "There's no doubt conditions are tough for retailers at the moment. Our latest Retail Sales Monitor showed the first year-on-year fall in like-for-like sales for two years. Consumer confidence levels are at a 15-year low and sharp rises in utility and fuel bills are putting pressure on household budgets."

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