Next blames warm weather for ‘disappointing’ sales

High street chain Next sparked fears of a dismal Christmas for clothing retailers after it blamed unusually warm weather for a “disappointing” festive sales performance.

The retailer said that full-price sales fell by 0.5% in its stores in the 60 days up until 24 December. Next’s Directory sales, which were up by 2% and also marked as “disappointing” were compounded by “poor stock availability from October onwards”.

On the back of its results – covering the period between 26 October and 24 December – Next boss Lord Simon Wolfson warned that annual pre-tax profits will be closer to £817m, which would fall into the lower end of its previous guidance (between £810m and £845m) issued in October.

The group expects full-year profits will come in towards the bottom end of its forecast, at £817 million, up 4.4 per cent on the previous year.

The performance during this key trading period means total brand sales are up 3.7% so far in the financial year that ends on January 30.

But he also highlighted that online competition was getting tougher as industry-wide service propositions catch up with Directory.

Next isn’t being too specific with forecasts for the year to January 2017, pencilling in Next brand full price sales guidance of 1-6%.

Still, an anticipated £370 million of surplus cash will be used to pay shareholders more special dividends.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, added: ‘Next has provided a stark reminder that the situation within retail is precarious and in the process has taken some of its competitors with it on a downward trend.

The unusual weather conditions led to widespread discounting on the high street as stores looked to shift stock in the run-up to Christmas.

He said Next’s Directory sales were probably 2% lower than they could have been as it had under-estimated the growing influence of its website in comparison to its big seasonal catalogue.

Because Next is a strong contender in the sector and is the first to report on Christmas trading, its results portend badly for rivals such as Marks and Spencer, which is due to update the market on Thursday.

But sales in the division may have plunged by as much as 5.5%, according to one broker.