Next is expecting sales to get worse after first-quarter revenue missed estimates

Next expects full-year sales to fall within a range of negative 3.5% and 3.5% growth due to weaker demand for clothing

Nextsaid the poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and a wider slowdown in consumer spending
Nextsaid the poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and a wider slowdown in consumer spending

Next, the British clothing retailer, cut its sales forecast for the second time this year after reporting first-quarter revenue that missed estimates on unfavorably cold spring weather, sending another chill over the embattled UK apparel sector.

Next now expects full-year sales to fall within a range of negative 3.5 per cent and 3.5 per cent growth due to weaker demand for clothing, the Leicester, England-based company said in a statement Wednesday. Sales under the Next brand declined 0.9 per cent in the period ended May 2, missing analysts’ estimate for unchanged sales. The shares fell 1.6 per cent in early London trading.

The company had already reduced its guidance March 24 as the outlook for consumer spending worsened. Chief Executive Officer Simon Wolfson has said that this may be the toughest year for Next since 2008, likening the environment to “walking up the down escalator.” The company’s comments on Wednesday add fresh concerns over the outlook for UK retailers, who’ve been dogged by falling consumer confidence and uncertainty around Britain’s upcoming referendum on leaving the European Union.

“Concerns around Brexit, a slowing labor market and lackluster wage growth are weighing on the minds of consumers,” said Richard Lim, CEO of Retail Economics. “Shoppers have cut back on discretionary spending and clothing retailers are feeling the brunt.”

Wider Slowdown

Next, which forecast in January that sales might rise as much as 6 per cent, said the poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and a potentially wider slowdown in consumer spending. Those concerns have also hurt competitors such as Marks & Spencer Group and discount apparel chain Primark, and contributed to the recent collapse of Britain’s BHS department-store chain.

“We believe it is unlikely (but possible) that sales will deteriorate further, and we have seen a significant improvement over the last few days as temperatures have risen,” Next said in the statement.

“The weather is finally going the right way but the customer might yet hold off buying her beachwear,” said James McGregor, a partner at consultant Retail Remedy.

Next shares have fallen by a third over the past twelve months, a steeper decline than Britain’s benchmark FTSE Index.

© 2016 Bloomberg L.P

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