Next cautious after fall in sales

Next said it remained cautious about trading prospects today after the high street chain reported a 6 per cent fall in half-year like-for-like sales.

The Leicester-based company said it expected to achieve a similar figure for the second half of its financial year, with continued increases in food, fuel and mortgage costs likely to impact on its customers.

It added: "We remain very cautious about the outlook for the second half and can see no reason for any improvement in consumer spending. Indeed, the economic risks appear to us to be on the downside."

Like-for-like sales in the 353 stores unaffected by new openings were down by 2.4 per cent in the second quarter to July 26, but Next said the improvement on a first quarter drop of 9.4 per cent was due to unusual weather patterns.

It said it had managed its business tightly, with the amount of stock going into its end of season sale significantly down on last year. On a more encouraging note, Next said its Directory business traded at the top of expectations following a 2 per cent rise in half-year sales.

Nick Bubb, a retail analyst at Pali International, stuck by his previous forecasts for Next to achieve annual pre-tax profits of £420 million, compared with £498 million a year earlier.

He said the 6 per cent fall in like-for-like sales was better than the company's previous guidance for a drop of 7 per cent, but he said the bleak economic outlook meant he would not be lifting his full-year forecast.

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 set aside £122 million to spend 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.