Next Cuts Sales Outlook Again as Spending Outlook Worsens

  • Retailer sees `significant' improvement in last few days
  • First-quarter sales miss estimates on unfavorable weather

Next Plc, the British clothing retailer, cut its sales forecast for the second time this year, yet signaled an improving performance in recent days as warmer weather has sent Britons shopping for summer apparel.

Next now expects full-year sales to fall within a range of negative 3.5 percent and 3.5 percent growth due to weaker demand for clothing, the Leicester, England-based company said in a statement Wednesday. Still, the company said it’s seen a “significant improvement” over the last few days as U.K. temperatures have risen. The shares rose as much as 3.4 percent in London.

“We expect some pent-up demand to come through from May as temperatures rise,” said Richard Chamberlain, an analyst at RBC Capital Markets.

The company had already reduced its guidance March 24 as the outlook for consumer spending worsened. Chief Executive Officer Simon Wolfson has said that this may be the toughest year for Next since 2008, likening the environment to “walking up the down escalator.” The forecast cut adds fresh concerns over the outlook for U.K. retailers, who’ve been dogged by falling consumer confidence and uncertainty around Britain’s upcoming referendum on leaving the European Union.

“Concerns around Brexit, a slowing labor market and lackluster wage growth are weighing on the minds of consumers,” said Richard Lim, CEO of Retail Economics. “Shoppers have cut back on discretionary spending and clothing retailers are feeling the brunt.”

Cold Weather

Sales under the Next brand declined 0.9 percent in the period ended May 2, missing analysts’ estimate for unchanged sales, due to cold spring weather.

Next, which forecast in January that full-year sales might rise as much as 6 percent, said 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. Those concerns have also hurt competitors such as Marks & Spencer Group Plc and discount apparel chain Primark, and contributed to the recent collapse of Britain’s BHS department-store chain.

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