29th Oct 2014 08:45
LONDON (Alliance News) - Next PLC Wednesday lowered its full-year earnings forecasts, blaming lower sales as warm autumn weather meant consumers delayed purchases of winter clothes, news that hit the sector as a whole as analysts expect other clothing retailers to be similarly hit.
The UK fashion retailer said it now expects sales growth of 6% to 8% for the year to January 2015, down from its previous growth forecast of between 7% and 10%, and cut its full-year pretax profit estimate to between GBP750 million and GBP790 million, representing annual growth of between 8% and 14%.
The company had warned in September that unseasonably warm weather might affect sales of new clothes as winter approached, reporting sales of 6% at that point in the quarter compared with its forecast for more than 10%.
Next has seen a surge in sales growth over recent years, outpacing other high street fashion retailers by quickly embracing online sales channels through its directory unit. The unit reported sales growth of 12.4% in the year to January 2014 compared with 1.7% growth in its high street stores.
Still, like other clothing retailers, Next is dependent on changing seasons to launch new clothing ranges and has been affected by unusually warm weather in the UK. The Office for National Statistics said retail sales fell 0.4% in September, the first fall in four months, with clothing sales down 7.8% from August.
Next said fourth-quarter full-price sales, which includes the key Christmas period, might even drop by as much as 2%, such has been the effect of the weather, though the top end of its forecast was for growth of 4%.
Sales growth in the 13 weeks to October 25 was 5.4%, with retail sales contributing 2.4% and directory sales contributing 9.7%. That was a big slowdown from the first half of the year: its nine-month sales growth was 8.8%, with retail sales up 5.8% and directory sales up 13.7%.
Next said it didn't intend to pay any further special dividend this year after returning GBP361 million so far in the year to shareholders through share buybacks and special dividends.
At 0834 GMT, Next shares were down 2.8% at 6,255 pence, their lowest level since June and the worst-performing stock on the FTSE 100. The statement was hitting other retailers, with Marks & Spencer the second-worst performing stock. On the FTSE 250, shares in Debenhams, Ted Baker and SuperGroup were also amongst the worst performers.
"Lower than anticipated full-price sales mean growth forecasts for peak are lowered, and we suspect this represents a risk across the industry of a highly promotional run-in to peak," Investec analyst Alistair Davies said in a statement.
By Ian Edmondson
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