Next Bruised by Britain's Ebbing Economy as Clothing Sales Sagby and
CEO Simon Wolfson likens climate to walking up down escalator
Shares fall as much as 17% in London, most since March 1998
Next Plc Chief Executive Officer Simon Wolfson said spending on clothing won’t be able to escape the U.K.’s slowing economy, cutting his sales growth forecast and sending the retailer’s shares down the most in 18 years.
A week after Chancellor of the Exchequer George Osborne cut economic growth forecasts, Wolfson likened the year ahead to “walking up the down escalator, with a great deal of effort required to stand still.” The stock slid as much as 17 percent in London Thursday, the steepest drop since March 26, 1998.
The outlook for consumer spending “does not look as benign as it was at this time last year,” Wolfson said, adding that this may be the toughest year for Next since the financial crisis of 2008.
Such cautious comments from a company known as one of the industry’s most reliable added to concern over the outlook for U.K. retailers, whose sales fell in February. A measure of consumers’ economic optimism plunged to the lowest in almost three years last month, with the upcoming referendum on whether Britain should leave the European Union adding to potential risks. Wolfson also pointed to a possible shift away from spending on hoodies and jeans in favor of travel and dining out -- areas that suffered most during the credit crunch.
“These wider consumer and economic trends may reverse as the year progresses,” Wolfson said. “However our instinct, along with the volatility of our own sales, suggest that it would be sensible to prepare for a tougher economic environment.”
Next lowered its forecast for growth in sales of goods at full price by 2 percentage points. It now sees revenue in a range of down 1 percent to up 4 percent, compared with a Jan. 5 forecast for growth of 1 percent to 6 percent.
Next, whose earnings have beaten analysts’ estimates each year for more than a decade, is facing increasing competition in its Directory online business. Inditex’s Zara has been cutting prices relative to peers, according to Credit Suisse research.
“We think the statement will weigh on the rest of the U.K. apparel sector although Next does appear to have some more company specific issues,” Richard Chamberlain, an analyst at RBC Europe, said in a note.
- U.K. retail sales fell in Feb. as colder weather crimped demand for spring-summer attire
- Next full-year underlying pretax profit rose 5 percent to 821 million pounds ($1.2 billion)
- Full-year sales under the Next brand advanced 3.7 percent