Plunge in sales at Next heightens fears of consumer slowdown

The clothing giant Next stoked fears about consumer spending after admitting yesterday its sales had plunged much faster than expected.

The clothing giant Next stoked fears about consumer spending after admitting yesterday its sales had plunged much faster than expected.

The group said like-for-like sales in the past 15 weeks were 6.3 per cent below last year, twice as bad as the City had feared. Shares in the company tumbled 39p to 1,466p.

Simon Wolfson, the chief executive, said: "It's got worse." He does not expect conditions on the high street to improve before November at the earliest.

The deterioration at Next comes amid mounting fears that the slowdown in consumer spending is set to accelerate, tipping the wider economy into recession. As one of Britain's biggest - and most successful - retailers, Next is viewed as a bellwether for the sector.

Although some commentators had hoped for a "post-election bounce" in retail spending, Mr Wolfson rubbished the idea, saying any improvement hinged on interest rates. "The Bank [of England] is definitely having the desired effect in slowing consumer spending," he said.

Analysts estimated that underlying sales at the group in April and May fell by about 8 per cent.

Mr Wolfson said "I'm not as pessimistic as the 8 per cent fall would suggest. The general environment was tough and we were up against our toughest comparative period." He added the group had not altered its internal sales forecasts and was budgeting for the same drop in underlying sales.

Despite the group's trading woes, Mr Wolfson said it would press ahead with an ambitious space programme. It plans to open an extra 800,000 square feet of trading space, which will increase the size of its estate by 24 per cent. "What gives us confidence in new space is that new space is hitting its targets," he said.

Analysts at Goldman Sachs said: "Such high space growth is going to add to the cost pressures already prevalent in UK retail. However, Next should be able to offset these with further dollar-sourcing benefits."

Total sales for the Next brand rose 6.6 per cent, boosted by an 8.1 per cent climb in sales at its directory arm. On the group's own measure of like-for-like sales, which excludes those stores affected by the opening of new space, there was a 3.2 per cent decrease.