Next reports sales slowdown

 

Fashion retailer Next reported a marked slowdown in consumer spending and said strong online sales would help it to meet profit expectations in a tougher second half.

"There has been a noticeable cooling in retail demand in recent months," Next said.

"We believe that consumer spending will be more restrained in the second half than in the first, as (public) spending cuts and tax rises begin to take effect," it said. referring to recent government moves aimed at reducing state borrowing.

Next, which runs over 500 stores in Britain and Ireland, said first-half sales at shops open at least a year fell 1.5 per cent, down from a 0.8 per cent decline reported after the first quarter and towards the bottom of analysts' expectations.

However, sales at its Directory home shopping business climbed 7.8 per cent, towards the top end of forecasts.

The group said it expected underlying retail sales to fall by 1.5 to 4.5 per cent in the second half, with Directory sales up 4 to 8 per cent.

Gross profit margins increased in the first half and full-year profit would rise 6 to 11 per cent to £535 million to £560 million, broadly in line with analysts' expectations, it added.

Next shares have beaten the STOXX 600 European retail index by 3 per cent this year and trade at 10.6 times forecast earnings, below bigger rival Marks & Spencer on 11.5.

Reuters