High street bellwether Next has posted a dip in first-half profits and warned that trading remains “challenging and volatile”.
The chain posted a 1.5 per cent decline in pre-tax profits to £342.1 million for the six months to the end of July, dragged down by a 16.8 per cent slide in earnings across its retail outlets.
An impressive end-of-season sale performance in July helped buoy trading towards the end of the first half, but the group dashed hopes of a bounce-back in consumer spending since the Brexit vote.
Chief executive Lord Wolfson said: “Trading since July, which to some extent may have been affected by the sale, has remained challenging and volatile.
“It has been a challenging year so far, with economic and cyclical factors working against us, and it looks set to remain that way until mid-October at the earliest.”
He noted that the September heatwave had done little to help clothing retailers.
Next held its interim dividend at 53p per share. In morning trade, shares in the group were down by about 5 per cent.
George Salmon, equity analyst at Hargreaves Lansdown, said: “Next’s results show in real time the changing habits of the UK consumer. “With its stores reporting falling sales, Next is dependent on the online Directory business for growth. Unfortunately, as competition intensifies online, their Directory division has come under pressure too, meaning the shares have spent 2016 going backwards.
“Hopes had been building for something of a summer recovery on the UK high street, but Next’s comments today have tempered that optimism a touch. July sales are ahead of last year, but the group say that the improved performance was due to a larger than normal sale, and that trading has dropped off more recently.”
He added: “Although conditions continue to look tough, there was some good news today. Early indications suggest some of the self-help measures introduced earlier in the year are starting to have a positive effect in Directory.
“Historically, Next has been a well-managed business and has delivered excellent returns to shareholders. Investors will be hanging their hat on the management’s solid track record continuing.”
Next has been cautioning over retail prospects for a number of months, warning of a consumer spending shift away from clothing.
It said in March that consumers were instead splashing out on eating out and travel, warning the current financial year was set to be its worst since the financial crisis.
But Lord Wolfson has said there has been no clear evidence of a worsening in trading directly as a result of the referendum decision.