Next Sales Disappoint as Retailer Seeks to Uphold Profit Record

  • Sales helped by increased discounts, weak year-ago comparison
  • Retailer sees continued volatility in consumer demand

Next Plc maintained its sales momentum in the third quarter, though that wasn’t enough for investors used to the U.K. clothing retailer’s outperformance of peers.

Next shares fell as much as 2.3 percent in London, even as the company slightly raised the lower end of its full-year profit outlook. Sales of full-priced Next brand items rose 6 percent in the quarter, a figure that analysts said was flattered by comparison with a weak result a year ago. Consumer demand for its sweaters and jeans also remains volatile, it said.

“October was not exactly a blow-out, despite weak comps,” Nick Bubb, an independent retail analyst, said by e-mail.

Next has beaten analysts’ profit estimates in all of the last 10 years, giving investors high expectations of the fashion retailer. The stock trades on a multiple of 18 times prospective earnings, according to estimates compiled by Bloomberg, compared with 14 times for competitor Marks & Spencer Group Plc.

The shares fell 1.1 percent to 7,860 pence at 8:49 a.m. in London, trimming their advance for the year to 15 percent.

Sales growth of 6.2 percent in the Next Directory home-shopping unit was also below estimates, weighing on the stock.

‘Slightly Disappointing’

“The results are slightly disappointing, particularly in terms of sales for Directory,” which has been “slowing down a lot,” Tony Shiret, an analyst with Haitong Securities in London, said by phone.

British retailers are under pressure to attract and retain customers, despite a recovery in the economy. With more than 500 outlets across the U.K. and Ireland, Next, the U.K.’s largest clothing retailer by market value, is plowing ahead with store expansion as rival Marks & Spencer Group Plc grapples with falling fashion sales and management flux.

“September looks particularly strong, but sales were flattered by poor comparative weeks last year,” the Leicester, England-based company said. Last year’s second-half revenue suffered from unusually warm weather in September through early November.

Next predicted full-year pretax profit of 810 million pounds ($1.2 billion) to 845 million pounds and said it expects Next-brand sales growth of 4 percent to 6 percent for full-priced items.

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