Next cuts profit forecast despite healthy December sales as chief dismisses Brexit fears

Next cuts profit forecast despite healthy December sales as chief dismisses Brexit fears

Thursday, January 3, 2019

Fashion chain Next has cut its annual profit forecast and predicted falling earnings over the year ahead despite revealing a solid Christmas performance.

The group said full-price sales rose 1.5% between October 28 and December 29, in line with expectations.

It saw high street store sales slump 9.2% over the Christmas trading period, though this was offset by a 15.2% surge online.

But it downgraded its profit forecast to £723 million for the year to January, from the £727 million previously expected, and said the next financial year will remain under pressure.

It blamed the gloomier profit outlook for the current year on higher sales of seasonal products, such as personalised gifts and beauty products, which have a lower profit margin than its clothing ranges.

The group also said it faced higher operational costs on online sales.

Brexit 'uncertainty'

Shares rose 6% as the group shrugged off fears of a festive sales washout.

For the year to January 2020, Next predicted profits will fall 1% to £715 million while full-price sales growth will ease back to 1.7% from the 3.2% expected for 2018-19.

The group said: "In the year ahead, we are assuming a similar economic environment as that experienced in the second half of the current year.

"Within this guidance, we expect retail sales to be down 8.5% and online sales to be up 11%."

But it said this came with a "high degree of uncertainty" and does not factor in the "potential benefits of a smooth transition or the downsides of a disorderly Brexit".

Chief executive Lord Simon Wolfson said November was hit hard by unusually mild weather, but that spending bounced back in December.

A prominent supporter of Brexit, Lord Wolfson told the Press Association the fears over the impact of current economic uncertainty on consumers were overdone.

He said: "People are maybe a little bit more cautious, given the uncertainties around Brexit.

"But I think that's as strong as you can put it."