Next warns of tougher times to come

As Next updates the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

Next warns of tougher times to come

The tough conditions on the British high street have been reflected in the latest results from Next plc, a bellwether for the clothing industry.

Between 1st November to Christmas Eve, sales of full price merchandise were down 0.4% compared to last year, driven by a continued fall in sales of -3.5% at Next Retail. There was further disappointment in end of season sales which were down 7% on last year.

The company made many references to the current difficult trading conditions in its statement this morning, and has forecast full-year profits before tax to be £792m. This is at the lower end of previous guidance and down by 3.6% from the previous year.

Management’s forward looking guidance wasn’t encouraging either. They cited a cyclical slowdown in clothing and footwear, a squeeze in general spending as inflation erodes consumer earnings, while the devaluation of the pound will impact on garment cost prices. Their guidance for the upcoming year has therefore also been downgraded.

This disappointment has been reflected in the share price which opened down by 12%. Our view is that the trading conditions are not likely to improve any time soon with the only good news coming from growing online sales and good translated earnings from international operations.

The UK retail market is only going to get tougher and we therefore continue with our medium risk ‘hold’ recommendation for investors looking for a balanced return.

 

Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. 

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