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Bloomberg
UK clothing retailer Next Plc forecast another tough year after a disappointing Christmas, sending its shares plummeting and dealing a blow to the industry at the start of the holiday reporting season.
Pretax profit for the year through January 2018 will be in a range of 680 million pounds ($834 million) to 780 million pounds, the company said on Wednesday, below estimates of about 784 million pounds. Next also cut its forecast for the year ending this month, pushing the stock down as much as 14 percent, the most since Britain voted to leave the European Union in June.
The reduced guidance from one of the industry’s bellwethers is likely to deepen concern that rising expenses and a Brexit-induced squeeze on consumer spending will pinch industry profits in 2017. Shares of Marks & Spencer, Primark-owner AB Foods and Debenhams also slid ahead of their Christmas trading updates next week.
“Next’s outlook for 2017 rings the alarm bell for the rest of the sector,†Charles Allen, an analyst at Bloomberg Intelligence, said by phone. “There’s a widespread expectation that consumer spending will be under pressure this year.â€
Christmas was “moderately disappointing,†Chief Executive Officer Simon Wolfson said by phone. Early-season discounts by competitors led to a drop in demand at Next’s traditional post-Christmas clearance event, when sales were down 7 percent. The retailer has a policy of never discounting before the holiday and won’t be changing that approach, Wolfson said. Full-priced sales under the Next brand fell 0.4 percent in the 54 days ended Dec. 24, a far cry from the 2.2 percent increase that analysts expected.
Biggest Challenge
Next predicted a continued slowdown in outlays on clothing and footwear over the next year amid a tendency of Britons to spend more money on leisure activities. Wolfson called the trend the biggest challenge for the retailer this year.
“We are preparing the company for tougher times,†the Leicester, England-based retailer said in a statement. Not all retailers are finding business so difficult. B&M European Value Retail SA, a U.K. discounter that sells everything from toys to decorating tools, said Wednesday that it expects to meet analyst estimates of full-year profit after a strong Christmas when domestic like-for-like sales rose 7.2 percent.