Gloomy summer dampens hope of early Next upturn

Published on Sunday 9 September 2007 00:40

NEXT chief executive Simon Wolfson will this week dash hopes of an early recovery at the clothing chain when he is expected to reveal a drop in first-half sales of as much as 6%.

The first-half figures will come as a blow to Wolfson, who launched a three-year, 17m recovery plan in March. It had been hoped the plan would help Next, the UK's second largest clothing company, to mirror Marks & Spencer's return to form.

Analysts blame a "poor" spring and summer collection and the bad summer weather for what they expect will be a substantial drop in like-for-like sales in the first six months of the year.

Next warned in an earlier statement of a 1%-4% decrease but Seymour Pierce analyst Richard Ratner predicts the dip could be as high as 6%. Pre-tax profits are expected to come in marginally above last year's figures at182.2m, up 3.3m from 178.9m.

But there are signs that the tide could turn for Wolfson in the run-up to Christmas.

Analysts are predicting that Next's autumn and winter collection, which they say is a substantial improvement on its spring and summer offering, could prove a "turning point" for the chain.

Ratner said: "Our view is that they [the autumn and winter clothes] are not just one notch up the scale against the spring/summer merchandise, but three to four degrees better.

"They appear to be aimed at the 'better' and 'best' areas of the market, where we believe there to be a space, especially as the M&S recovery has been based on [its clothing range] Per Una and 'entry price point' merchandise."

Wolfson will no doubt join M&S's Stuart Rose in keeping a watchful eye on the weather, however. Analysts say the success of the autumn and winter collection will again hang on the climate, with fears that an Indian summer will keep shoppers away from buying warmer clothes.

Meanwhile, French Connection is expected to show a modest improvement in sales when it publishes its half year results on Tuesday.

Analysts predict a slight improvement on its double digit declines over the past two years, which saw profits tumble by 67% during the year to 31 January 2007.

A rise in sales of 2% at French Connection's retail arm during the first quarter has sparked hopes of a modest upturn in its fortunes, although some serious price slashing during the summer to entice shoppers out of the rain is expected to have taken its toll on profit margins.