Spring sales at Next were not as bad as it first predicted, but the retail giant has warned it expects trading to get tougher this summer.
The high street and out-of-town clothes and homewares chain reported a 0.7 per cent drop in full price product sales for the first three months of the year – ahead of what it initially predicted would be a 2 per cent drop – helped by a rush for Easter holiday clothing.
The retailer, which has its national head office in Leicestershire, said it was maintaining its sales and profit guidance for the full year though – forecasting pre-tax profits of £795 million (8.7 per cent down on last year) and sales an expected 1.5 per cent drop in sales.
It said it now expects sales in the current three months to fall by 5 per cent, following a boom in trading a year ago when there was a release of pent-up demand for summer events after Covid restrictions were lifted. It had previously pencilled in a 4 per cent decline for the second quarter.
In a trading update the business said: “Although our first quarter performance moderately exceeded our sales guidance, we believe it is too early in the year to alter our overall sales expectations for either the half or full year.
“To maintain our first half forecast, we have moderated our sales forecast for the second quarter, which is now planned to be minus-5 per cent down on last year (previous guidance was minus-4 per cent).
“This adjustment seems reasonable, as some of the first quarter’s success, particularly in holiday clothing sales leading up to Easter, might have been pulled forward from the second quarter.
“Shareholders might wonder why we are so cautious for sales in Q2. As we explained in March, the second quarter last year benefited from unusually warm weather and pent-up demand for events such as weddings, proms etc.”
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Next has been raising prices in the face of soaring energy and wage bills although it said last month that price hikes would increase more slowly as pressures begin to ease.
It expects price rises across its ranges of around 7 per cent this spring and summer, easing back to 3 per cent in the autumn and winter, having previously warned over increases of 8 per cent and 6 per cent respectively.
The group put this down to easing supply chain issues, with sharply lower shipping costs.
Russ Mould, investment director at online stockbroker AJ Bell, said while the sales update was moderately ahead of expectations, it was “nothing to get excited about”.
He said: “Sales growth has stalled and the only area where it is making decent gains is from the income attached to customer credit accounts.
“Next has a serious growth problem and while it may remain a profitable business, a company of its calibre is expected to show financial progression year after year.
“Repeated guidance for an 8.7 per cent decline in full-year pre-tax profit suggests the business needs to pull a rabbit out of the hat to regain its mojo.”