Retail giant Next has cut its profit outlook again and warned trading remains under pressure after an 8.1% plunge in high street sales.
Shares fell as much as 7 per cent at one stage after the worse-than-expected first-quarter performance as the group battles against falling consumer confidence and the impact of mistakes in its clothing range last year.
Omissions in our own range are hitting our sales over and above any downturnLord Wolfson
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Next said its Directory arm performed better than its stores over the 13 weeks to 29 April, with sales up 3.3 per cent, but total full-price sales were still 3 per cent lower.
The group cut the top end of its profit guidance after the disappointing trading, with full-year profits expected to be between £680 million and £740m – a drop of between 6.4 per cent and 13.9 per cent. It comes after Next posted its first fall in annual profits for eight years in March.
The group warned: “The UK consumer environment remains challenging, particularly in the clothing and homeware markets, and real wage growth is now close to zero.”
Lord Wolfson, chief executive of Next, said he was expecting “more of the same” in the group’s second quarter as action to overhaul its clothing ranges will take time to turn sales around.
He added: “There’s general pressure on the high street, but the omissions in our own range are hitting our sales over and above any downturn.”
The group admitted in March that its lines were missing the wardrobe staples Next is renowned for, such as easy-to-wear work blouses in a number of colours.
“We said that we expected some improvements from May onwards, but that our ranges would not be where we wanted them to be until the autumn season in September. We still believe this to be the case,” Next said today.
Shares in rival Marks & Spencer also fell as Next added to growing concerns over a consumer spending slump caused by the squeeze on household finances from rising prices.
Sainsbury’s warned yesterday that falling consumer confidence was hitting its clothing and general merchandise sales growth.
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The pound’s fall since the Brexit vote has sparked a surge in inflation, with prices rising across food, energy, clothing and fuel. Next has hiked prices by 4 per cent after seeing buying costs pushed higher by the pound’s fall.
George Mensah, retail analyst at Shore Capital, warned that pressure on Next was not set to ease, compounded by mounting competition from the likes of Amazon Fashion and M&S.
M&S yesterday announced it had poached Halfords boss Jill McDonald to lead its clothing and beauty push, while Amazon Fashion has launched its own-brand range, called Find.
Mensah said Next’s move to address shortfalls in its ranges “will not be sufficient” to offset these wider trading pressures.