NEXT, BRITAIN’S number two clothing retailer, kicked off the post-Christmas reporting season, saying sales and profit growth in its 2012-13 year would be modest, citing concerns over the euro-zone debt crisis, a credit squeeze on businesses and rising unemployment. Its shares fell 4 per cent.
“My sense is the underlying economic situation is slightly worse than it was in September and that the only thing that has really changed is the situation in Europe,” chief executive Simon Wolfson, a prominent supporter of Britain’s ruling Conservative Party, said.
Next said it would meet profit expectations for its 2011-12 year to end-January after sales rose 3.1 per cent in the August 1st to December 24th period, adding it was disappointed with its performance in November and December, blaming unhelpfully warm weather, discounting by rivals and economic headwinds.
Although Next has a long-standing policy of not discounting before Christmas, Wolfson said rivals’ pre-Christmas activity was “more than I have ever seen before”.
A 2.7 per cent fall in store sales was offset by a 16.9 per cent jump in the firm’s Directory home shopping business.
Britain’s biggest department store chain John Lewis also benefited from a strong internet offer, with a 27.9 per cent leap in online sales driving a 9.3 per cent rise in total sales over the five weeks to December 31st.
Although employee-owned John Lewis might be counted among the Christmas winners, analysts are concerned its profit margins will have been eroded by its guarantee to match competitors’ prices. And with shoppers’ disposable incomes squeezed by rising prices, muted wages growth and government austerity measures, the store chain is not expecting an easy year.
“Trade in 2012 will undoubtedly be challenging and economic conditions volatile,” Managing Director Andy Street said.
In the UK, with unemployment at a 17-year high, confidence hit a 34-month low in December.
Yesterday Bank of England data showed British mortgage approvals rose to their highest level in almost two years in November, but net lending sank to its lowest level since June. (Reuter)
