Sales rise at Next defies UK retail gloom

Britain’s heatwave helped Next to stronger than expected sales over the last three months, but the retailer warned the boost from the hot weather was unlikely to last.

The clothing and homeware firm said sales rose 2.8% in the 12 weeks to 28 July, driven by a 12.5% jump in online sales as consumers updated their summer wardrobes. Sales at its shops, however, fell by 5.9% over the period.

The retailer warned that some of the sales growth probably reflected consumers bringing forward purchases they might have made in August.

“Full-price sales in the second quarter were up 2.8% on last year and ahead of our guidance. We believe that this over‐achievement in sales was due to the prolonged period of exceptionally warm weather, which greatly assisted the sales of summer weight product.

Retailers that have gone bust 2017-18

Toys R Us: 180 stores employing 3,000 staff, collapsed 28 February. Owes £15m in VAT, due by 1 March.

Maplin: 200 electronics and gadget stores, founded 1972, also failed on 28 February.

Warren Evans: bedmaker went into administration earlier in February.

East: fashion brand with nearly 50 outlets folded in January.

Juice Corp: business behind brands including Elizabeth Emanuel and Joe Bloggs went under in January.

Multiyork: furniture chain with 50 stores went into administration in November.

Feather & Black: bedroom furniture and bedding specialist with 25 outlets fell into administration in November.

Retailers under pressure

New Look has debts of more than £1bn and has lost some of its credit insurance cover, which protects suppliers if a retailer goes bust. In the 10 months to Christmas, sales fell 11% and losses hit £123m. The company intends to close 60 stores and change its fashion ranges, but faces a struggle to win back young shoppers.

House of Fraser‘s Chinese owner, Sanpower, had to stump up £25m to see the store through Christmas and its debt is rated as junk. The retailer is attempting to reduce the size of its stores by 30% and has asked landlords to cut rents.

Debenhams, a 178-store chain that is more than 200 years old, is axing one in four of its managers and considering closures to cut costs. It has warned that profits have been hit by lower than expected sales, with profit margins also down as a result of having to cut prices to match rivals.

Photograph: Tony Margiocchi / Barcroft Images/Barcroft Media

“It is almost certain that some of these sales have been pulled forward from August, so we are maintaining our sales and profit guidance for the year to January 2019.”

Shares fell 6% after the trading update was published, making Next the biggest faller on the FTSE 100.

In the first half of the year overall, full price sales – excluding discounted items – rose by 4.5% compared with the same period a year ago. This was entirely driven by online sales, which rose 15.5%, while sales across its 500 shops fell 5.3%.

The figures are the latest evidence of the tough conditions on the high street, with household names such as House of Fraser fighting for survival. Hundreds of stores have been closed and thousands of jobs lost on Britain’s high street in recent months.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Next expects to make a profit before tax of £717m this year, down 1.3% from last year, which the firm’s chief executive Simon Wolfson described as the toughest year in the past 25 years. It would mark the third consecutive fall in annual profits.

The retailer started its end-of-season sale a week earlier than last year and went into the sale with 20% less stock than last year. The sale has fared better than forecast and added £4m to profits, although this has largely been offset by higher warehouse and distribution costs.

Taking markdown sales together with full-price sales, total sales grew 3.9% in the first half.


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.  Learn more