Friday, August 12, 2022

Do Next’s results mean consumers are spending less on clothes?

Next has traditionally stood as the poster child for stability in the otherwise rocky British retail sector but now the fashion giant has been injured, recording its third cautionary statement in a row.

CEO Simon Wolfson’s disappointing Christmas trading update warned that 2016 would be a challenging year and he was not wrong. Full price sales in Next’s first quarter fell by 0.9% between 31 January and 2 May, which Lord Wolfson said could dent annual profits by as much as almost 9%.

Britain’s second biggest clothing retailer blamed the extended wintry weather and the early onset of Easter, and just as UK retailers BHS and Austin Reed collapse, should other clothing retailers be cautious too?

“NEXT’s latest financials are a stark reminder that consumer confidence in the UK remains fragile,” comments Richard Lim Chief Executive of consultancy Retail Economics. 

“Concerns around Brexit, a slowing labour market and lacklustre wage growth are weighing on the minds of consumers. Shoppers have cut back on discretionary spending and clothing retailers are feeling the brunt. The ONS has reported even poorer conditions over the same period suggesting sales in the clothing sector fell by 3.9%, the worst in over 10 years.”

A statement from the high street chain read: “Much colder weather in March and April reduced demand for clothing, particularly over the Easter holiday period, which was unusually warm last year.

“In the same period our home and furniture full price sales, which are much less weather dependant, were up 7%.

“We believe it is unlikely (but possible) that sales will deteriorate further, and we have 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 slow-down in consumer spending.”


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