Results from UK retailer Next disappoint

Next started the Christmas reporting season for UK clothing retailers on a sour note by disclosing revenue that missed analysts' estimates and saying profit will come in at the bottom of its forecast range, adding to concern of weak holiday sales across the industry.

Full-priced sales advanced 0.4 per cent in the two months ended December 24th, the UK’s second-largest retailer said in a statement Tuesday. Analysts expected growth of 5.8 per cent, according to the median of 17 estimates.

Next said it expects pretax profit will be about £817 million for the financial year ending this month. Its forecast range is £810 million to £845 million. “The disappointing performance in the fourth quarter was mainly down to the unusually warm weather in November and December,” the company said. “In addition, the online competitive environment is getting tougher.”

The sales miss is a departure from Next’s typically stellar performance and adds to concern that unseasonably warm weather weighed on profit at the UK’s fashion retailers.

Next stuck to its mantra of not discounting before Christmas, preserving profitability in the face of pre-holiday price cuts by competitors including Marks and Spencer Group Plc.

Promotions by UK retailers reached their highest level since 2008, according to consultancy firm Deloitte. Earnings could fluctuate by as much as £7 million depending on January trading, Next also said.

Bloomberg