Next lowered its annual sales forecast following a tough third quarter when the retailer struggled to sell full-price clothing.
The company said a bigger than usual end-of-season sale in July, as well as stronger trading a year earlier, had affected its performance in August and September. Sales fell 3.5% in the third quarter.
“In September, we gave guidance that trading in the third quarter would be difficult. In August, full-price sales were subdued following the much larger end-of-season sale in July, and in September we traded against our best month last year. October sales improved significantly, as comparative weeks last year became less challenging.”
Next was one of the FTSE 100’s biggest risers in early trading, with shares up 2.2%. Lord Wolfson, Next’s chief executive, had previously warned that the retailer had seen no post-referendum recovery in sales and that trading remained difficult.
Nick Bubb, an independent retail analyst, said there was relief that the trading update was not more gloomy.
He said: “Ahead of the much-awaited third quarter update from mighty Next, the City has grown nervous about what the company would say, despite the evidence of much improved October trading, on the back of colder weather. The issue is how bad August and September were and so it is some sort of relief that overall full-price sales were only 3.5% down in the period.”
Next lowered its guidance for full-price sales in the year to January 2017, predicting a drop of 1.75% in the worst-case scenario, and a 1.25% increase in the best-case scenario.
The fashion retailer said it expected pre-tax profit to be between £785m and £825m, compared with a previous range of between £775m and £845m.
Freddie George, an analyst at Cantor Fitzgerald, said: “The brand is, in our view, not broken even if it has lost its edginess against some of the mainstream competitors. It is being impacted by a more competitive and difficult market, which we had expected would have been more robust in the lead-up to Christmas.”
