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LONDON (Alliance News) - Next PLC on Wednesday said sales fell in the first quarter of its financial year as unseasonably cold spring weather led to a reduced demand for spring clothing, leading it to lower its full-price sales guidance for the full year.
Despite this, shares in Next were trading up 4.3% at 5,190.00 pence, the best performer on the FTSE 100 on Wednesday morning.
The clothing and homewares retailer said total sales in the first quarter ended May 2 fell by 0.2% on the same period the year before, as full-price sales declined by 0.9%. The latter was at the lower end of its sales guidance of a 1% decline to 4% growth.
Next had warned at the time of its full-year results in March that 2016 could be the most challenging year for the retailer since 2008, due to an uncertain global economic environment as well as changing patterns in consumer spending.
By division, full-price sales in the quarter at Next Retail fell by 4.7%, while full-price sales at Next Directory grew by 4.2%, the latter driven by better stock availability.
Next said its results were hit by much colder weather in March and April, which reduced the demand for spring clothing, particularly over the Easter holiday period which was unusually warm last year.
Unseasonable weather was also blamed for the disappointing sales results experienced by both Next and its peers in the clothing sector over the Christmas trading period. In January, Next, which usually outperforms its peers, shocked the market when it reported sales growth which was below expectations resulting from warmer-than-normal winter weather.
Next said in March that it would work to better control stock levels so that it is not left with too much unsold stock in the future as a result of volatile weather conditions.
On Wednesday, Next said it believes it is unlikely, although possible, that sales will deteriorate further and that it has seen a significant improvement over the last few days as temperatures have risen.
However, the poor performance of the last six weeks "may be indicative of weaker underlying demand for clothing and a potentially wider slowdown in consumer spending", leading Next to widen and lower its full-price sales guidance range for the full year to between a 3.5% decline and 3.5% growth.
It did the same with pretax profit, which it now expects to fall to between GBP748 million and GBP852 million.
This is not the first time Next has lowered its guidance, as it already did so upon the release of its full-year results in March. At that time, Next lowered its pretax profit forecast to between GBP784 million and GBP858 million, correlating to between a 4.5% decline and 4.5% growth, which was down from previous guidance of 1.0% to 6.0% growth.
Next also lowered its full-price sales guidance in March to between a decline of 1.0% and growth of 4.0%, down from prior guidance of between 1.0% and 6.0% growth.
This is not unusual for Next, however, which on various occasions in the past has set guidance at the start of each year that it then has gone on to raise and exceed.
Next will release its first-half results for the 26 weeks ending July 30 on August 3.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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