Next lowers sales and earnings guidance as it sees ‘uncertain’ winter ahead | Business news

Subsequently, the fashion to homewares retailer lowered its sales forecast for the second half of the fiscal year and annual profit forecasts due to the difficult economy.

The company used the release of its half-year results through the end of July to say there were too many variables at play amid the cost of living crisis have great confidence in determining future consumer demand.

Widely regarded as the most consistent high street performer, Next reported that it had had a stronger-than-expected first half, with full-price sales up 12.4% from the same period last year.

Pre-tax profit of £401 million was up 16%.

Economy last

But it revealed that sales suffered in August before some demand returned in the current month.

Next, which trades from about 500 stores and online, said it now expected full price sales to fall 1.5% in the second half.

Previously there was an increase of 1%.

The full year profit forecast fell £20m to £840m but still represented a 2% increase over 2020/21.

Next said it hoped to see “benefits from recent government measures” – namely help for household energy bills – but admitted it was difficult to have a clear picture of what lay ahead.

The economy faces challenges on many fronts, with sterling hitting an all-time low this week and government bonds under heavy pressure after the mini-budget. Bank of England intervention.

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Inflation rising across the economy

“There are so many variables at play – energy, freight, employment, taxes, economic migration, exchange rates, etc. – that today, more than ever, it is not possible to predict the future based on the past,” the company says. said.

“It has been over forty years since the UK last experienced an inflation shock on the scale we see today; and the UK economy of the 1970s – with its reliance on highly subsidized and geographically concentrated heavy industry – was incomparably different than today’s economy.

“We’ve used our recent trading, along with some internal and external economic data, to build a picture of what we think is going on and how the business is likely to be affected in the coming months.”

The company’s results followed weak recent trading updates from rivals including Asos, Boohoo and Primark.

Shares of Next, down a third in the year to date, fell another 8% as the market opened.

The update was also seen as an incentive for price drops at companies like Ocado, Primark owner ABF, Asos, Boohoo and M&S.

Charlie Huggins, head of equities at Wealth Club, said of Next’s results: “The fact that many retailers are struggling should come as no surprise.”

“This is arguably the most difficult trading environment since the 2008/09 financial crisis. Inflation is at a level not seen in four decades.

“Sterling is in the doldrums, trading at its weakest level against the dollar since 1985. Add to that the war in Ukraine and the specter of further interest rate hikes. It’s not exactly conducive for consumers to restock their wardrobes.

“Perhaps the biggest problem for the entire industry is that while things look challenging at the moment, they seem to be getting even more so.

“This is due to the precipitous decline in sterling, which will only exacerbate inflationary pressures.

“Next seems better positioned than most of its peers to weather the storm and emerge stronger in the face of its high margins, robust cash flows and strong balance sheet. But 2023 could be a very difficult year given the the way things are developing.”

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