Fashion giant Next warns of stock 'challenges' even as sales boom: reaction

High street stalwart Next has posted a double-digit jump in sales, but cautioned that stock availability remains "challenging" amid supply chain issues and labour shortages.

The fashion and homewares chain reported third-quarter sales up 17 per cent versus two years ago after a better-than-expected recent performance, though it still forecasts growth to slow to 10 per cent over its final quarter.

It said this was down to a lessening of pent-up demand, while growth is also set to be hampered by supply issues, with disruption ongoing despite recent improvements.

Next added that rising inflation is likely to hit demand for more discretionary purchases as households tighten their belts.

Fashion chain Next is one of the most familiar brands on the high street.

The group raised its full-year sales growth outlook to 11 per cent from the 10.7 per cent previously forecast, but kept its profit guidance at £800 million.

Next told investors: "Stock availability has improved but remains challenging, with delays in our international supply chain being compounded by labour shortages in the UK transport and warehousing networks. However, to date, stock limitations appear to be offset by strong underlying demand."

It added: "Although consumer finances are in good shape, price increases in essential goods (such as fuel) may moderate demand for more discretionary purchases."

The firm said sales in the last five weeks of the quarter to October 30 rose by 14 per cent on a two-year basis, which beat its earlier guidance of 10 per cent and generated some £4m more of profit than expected.

But the group said this was set to be offset by slowing sales growth in the fourth quarter, as well as higher costs of air freight and other distribution costs in the difficult supply conditions. Next is also investing further in online marketing.

At its half-year results in September, the group warned over price hikes due to supply chain disruption and said staff shortages could impact its deliveries in the run-up to Christmas.

Next said some areas of the business were starting to come under pressure from a lack of foreign workers, particularly in logistics and warehousing, which may affect its delivery service going into the peak festive season.

Richard Hunter, head of markets at investment platform Interactive Investor, said: “Next has continued its relentless progress over the quarter, largely driven by the jewel in the crown which is its online business.

“Next remains a business which is in rude health. Its success is in stark comparison to many other struggling retailers, and even some of those who also have an established online presence.”

Zoe Gillespie, investment manager at Brewin Dolphin, noted: “Next is in good shape going into the key trading period building up to Christmas.

“Retail continues to be challenging, but there are signs of improvement on earlier in the year, and this has been more than offset by sales growth at its online operations. There are no doubt bumps in the road ahead – with stock availability and labour shortages in the UK’s logistics network highlighted in today’s update – but Next continues to go from strength to strength and increasingly looks like one of the high street’s winners.”

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